ISAs, Pensions or Property? The Pendulum Swings Again

Comment: ISAs, pensions and property. All three have had government incentives built in over the years, so it's easy to feel confused about your options

James Gard 29 March, 2023 | 9:23AM
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Tanks on the lawn

Achieving the holy grail of a golden retirement depends on a mixture of good fortune and timing (joining a company before it shutters its final salary scheme), intelligent choices (saving in your 20s), sensible planning (increasing your pension contributions every time you get a pay rise), and maybe something as simple as having a long, well-paid career.

For those of us without that perfect cocktail, however, we have to second-guess what the government thinks we should be doing. There are incentives everywhere, but sometimes they don't fit together as seamlessly as they might.

Having joined the workforce in the late 1990s, I've seen the pendulum swing between pensions, ISAs and property for years.

Governments over time have backed different horses: the ISA was launched in 1999, when market conditions were more benign and the idea you could provide comfortably for your later years by leaning on the stock market was more feasible.

Almost by extension, pensions then were "boring", complex, hard to access, and saddled with much larger fees than in the current era. Final salary schemes encouraged this complacency or willing ignorance until they became endangered species. The pensions mis-selling scandals of the 1990s were also still in living memory. 

Pensions Bounce Back

In the last decade, the pendulum has swung back to pensions: auto-enrolment started in 2012, and the pension freedoms followed in 2015. Being able to take a 25% taxfree lump sum at the slender age of 55 seemed like a signal from the then-coalition government that it wanted you to enjoy your hard-earned money before state retirement age – and that effectively parked the pension tanks on the ISAs lawns.

After all, the humble savings account also allowed you lump sump access. The Treasury continued to flirt with huge ISA-style taxation overhauls long after the pensions resurgence, but it was George Osborne's departure from the Treasury in 2016 that ended the love affair.

Nowadays, Jeremy Hunt’s latest Budget is giving pensions a steroid injection. Abolishing the lifetime allowance of just above £1 million in the Spring Budget was a bold move, and one likely to keep advisers and industry shills busy. Pensions is good business.

However, all of this appears to incentivise the already-wealthy rather than the "haven’t saved enoughs". After all, the state wants you to be self-sufficient in your golden years, so it's in its interest to make saving as broad a church as possible. 

Property: Late, Drunk, Shunned

Britain’s property boom felt like a gatecrasher to this debate but one that was welcomed and tacitly encouraged by governments of all stripes, intoxicated as they were by low interest rates. Any mechanism to support self-reliance was approved of in the good times.

The state didn’t exactly endorse "my property is my pension", but a number of incentives such as mortgage interest tax relief suggested that it had the back of buy-to-letters. Today, incentives are few and far between, and those late to the party are looking to offload as mortgage rates soar. Still, enough people are supplementing their retirement income with rental payments to merit discussion of how it’s part of the wider money landscape.

Hopefully our special report week can persuade you of the ongoing merits of the humble Individual Savings Allowance, and to do that we’ve asked some experts to wade in on this longrunning "pensions or ISAs" debate.

To spoil the punchline slightly, their conclusion is that investors could consider "pensions and ISAs". Either way, the ISA has already outlived a fair few prime ministers and chancellors in its short life and is unlikely to be dismantled or demolished. Long live the ISA! Just don't forget your pension contributions along the way...

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James Gard

James Gard  is senior editor for


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