ISAs vs Pensions: the IFA's View

I spoke to Peter Chadborn, an IFA at Plan Money, whether the March Budget has shifted the landscape of saving for retirement

James Gard 28 March, 2023 | 9:18AM
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empty and full piggy banks

James Gard: Has the Budget changed the rules of engagement (again) for people choosing a savings vehicle for retirement?

Peter Chadborn: The overwhelming benefits of savings via a pension remain unchanged for the majority of people, but for those who are restricted by the current contribution allowances, or have saved hard to acquire significant pension assets already, the Budget has opened up more incentives. As ever with pensions, more change means more rules and potential unintended consequences to contend with.   

JG: Is there still an argument for holding both pensions and ISAs for retirement planning?

PC: It is primarily a question of access. If you can be reasonably certain that access to capital or income will not be required until age 55 (age 57 from 2028) then arguably a pension is preferable due to its tax relief and IHT friendly nature. But if access is likely sooner, or access to a larger proportion as capital, then an ISA is preferable. Of course these requirements are hard to predict and therefore, absolutely there is still a strong argument for investing in both pensions and ISAs.

JG: The inheritance tax issue seems to favour pensions massively now they can be “unlimited”? Will ISAs miss out now?

PC: I don’t believe so, because most people are unable to undertake significant inheritance planning until several years into retirement, and by then the pension funding options are much diminished. This is because the timing of IHT planning is most appropriate when we can be confident that our retirement provision is sufficient; that the planning and forecasting has worked. The most effective IHT strategies are largely irreversible so it would be unwise to make such calls too soon, and certainly for most people not before transitioning into retirement.   

JG: If Labour were to undo Jeremy Hunt's changes if they get in, does that mean yet more confusion for investors and savers? Can people trust the government to provide the right incentives for a decent retirement or is it a case of hedging your bets (pensions, property, ISAs, state pension) and hoping for the best?

PC: You should only make financial planning decisions based upon the rules and incentives at the time, and do not try to second-guess what a future chancellor or regulator may or may not do. However, at all times you need to accept the likelihood that some of the criteria and taxation will change in the future. And for this reason, it is imperative to diversify by utilising a variety of different investment vehicles.  

JG: Does the Lifetime ISA still need to exist or is there an argument for just having one ISA for adults and one for children?

PC: The LISA has proved reasonably popular in terms of incentivising aspirational first-time buyers to save, and to do so via a product specifically designed to support their goals. Hopefully once the house purchase has been achieved, they are then sold on the merits of continuing to save. The age at which a LISA assets are required is necessarily fluid, so therefore I do not see an argument for changing the current arrangement to one that distinguishes between an adult and a child ISA. Afterall, we have a JISA for that purpose.

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James Gard

James Gard  is senior editor for


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