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With a million more people set to be dragged into the higher rate of income tax in the next four years, NFU Mutual are reminding those in their 50s they could be thousands of pounds better off prioritising investment in pensions over ISAs. |
While money can normally be taken from ISAs at any time, flexible pension rules mean investors can access pensions from 55-years-old (57 from 2028) taking the money as lump sums if they wish. The impact of pension tax relief means returns could be boosted by up to 41.6%.
Example:
Investor with £6,000 to invest
Higher rate tax payer with earnings of £60,270 Plans to invest for five years Assumes no growth and no charges ![]()
Sean McCann, Chartered Financial Planner at NFU Mutual, explained: "Many people prioritise ISAs over pensions because it allows them to access funds if they need to. "Once you reach 50 and over, the point at which you can take money from your pension draws closer. "For those looking to invest for five years or more, the tax relief available can give a significant boost to returns, particularly if you’re going to be in a lower tax band when you take the money out. "Latest figures show nearly four million people between 55 and 64 hold ISAs, but many of them could be better off topping up their pension and claiming the tax relief. "It’s important to remember that once you take a taxable payment from your pension, your future pension contributions are limited to £4,000 each tax year." |
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