Pension or ISA?

roomaniac

I am expecting a small windfall shortly, around £5k. I have no particular plans for it, and want to invest it.
I am not sure whether I should put it into my pension and get the 40% tax credit or into my ISA, so I can access it if I need it.

Bit of background: I am 5 years off the earliest date I an access my pension pot and am self-employed, with all the uncertainty that brings. I do have other savings though, about enough to keep us going for about a year if I couldn't work.

Is it worth the risk of not being able to access it for the tax benefit?

bigadaj

So long as you have an emergency fund and no obvious place to spend this in the next few years then pension would win hand over fist assuming you pay enough 40% tax.

If you contribute the £5000 then that will be grossed up by the pension provider, so £6250 would go into the pension and you'd be able to claim £1250 back from hmrc. So for a net cost of £3750 you would have £6,250 in your pension, don't think any isa would offer that immediate return. You will pay tax on the pension though when you draw on it, but can get 25% as a tax free lump sum.

kidmugsy

roomaniac wrote: »

Is it worth the risk of not being able to access it for the tax benefit?

You've summarised the question precisely. Only you can answer it.

Is there any reason not to bung it into a high interest current account now, and then pop it into a pension in your last year of work? What is the rush to get it into a pension now, especially since you can't know yet whether you will be a 40% payer this year.

atush

Only you know if you have enough cash and investments that can cover any emergency or upcoming needs.

So asking us this w/o disclosure means we have no answer.

roomaniac

I do not know why I didn't think of that. Of course, i will need to be alert to the Chancellor ending or reducing tax relief.