ISAs can be used to save for anything – including retirement, so they're useful alongside a pension. There are limits to how much you can pay in each year though and the tax benefits work in different ways from pensions. So, pension or ISA?

  • Allow short or longer-term saving
  • Can be used for anything – including retirement savings
  • No tax relief on money paid in
  • No tax on growth or when you withdraw money.

There are two types of ISA:

Cash ISA

  • A savings account that earns tax-free interest
  • Typically less risky but their growth potential is linked to interest rates.

Stocks and Shares ISA

  • Tax-efficient
  • No tax on any dividends received
  • Profits exempt from capital gains tax
  • Invest on stock market and have greater growth potential
  • Come with risk of losing money if markets fall.

Both kinds have a pay-in limit each tax year. Find out the limits at HMRC(Opens new window).

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