Pension or isa?

djderby555

Hi there,
I am 48 and have got a little bit of money (£2000) that I have just got from a PPI claim that I can save for the future. I have a low income so pay no tax and I was wondering whether to top up my SIPP or my Shares ISA? I haven't used my personal allowance for either of them this year. Which is the most efficient way of saving which will give me the best long term return? I have a small SIPP pension pot and I am intending to retire at 55.
Thanks

starkiwi26

I think the answer is obvious.

Pension hold the money until your retirement (no early withdrawal)
When you reach your pension age, and would like to withdraw your pension, the pension entitle for only 25% tax free, but the rest 75% is taxable (Compared to now, your income is tax free)

ISA has no time limitation, can withdraw before/during/after your retirement
ISA is totally tax free.

If my answer above clarifies your doubt, please click the "Thank you" button. I learned a lot from fellow MSE members here, it is time to contribute back. :beer::beer:

atush

Well you arent going to retire at 55 ith a very small sipp, so i'd say pension. And if you have no income from age 55, you wont pay tax on the pension as you will use your PA to keep it tax free- at least until state pension age.

enthusiasticsaver

I would put it in the SIPP to get the 20% extra from HMRC. What will you be living off at age 55?

kidmugsy

djderby555 wrote: »

I am 48 and have got a little bit of money (£2000) that I have just got from a PPI claim that I can save for the future. ... I am intending to retire at 55.

As the sensible commenters have observed there's a good chance that the pension is the better bet. My main reservation is that the money would be tied up for at least seven years. If you are confident that you have enough emergency cash already then you might be happy with the seven year tie-up.