Contributing to pension & ISA

Mds1978

Hi everyone - I have a question about contributing to a pension versus an ISA.

I currently earn a salary of 80k,  plus an annual bonus of around 13k, plus gross income from a BTL flat of around 21k.  I am contributing 12% of my salary, plus all of my bonus via salary sacrifice into my pension.  My employer also contributes 6% and I am saving 1000GBP a month into an ISA.

Does it make sense to stop the ISA contributions and sacrifice the equivalent gross amount of my salary into my pension?  If I take my contributions up to 37% I also drop out of the 40% tax band (excluding the BTL income) .  Or is it worth having some readily accessible money outside the pension?

My only concern about not contributing to an ISA is whether I want to retire before the age at which I can take my pension, and the fact that that age may go up.  This article - https://www.moneyobserver.com/guides/which-better-pension-or-isa-debate-settled-once-and-all - makes the case pretty clearly for pension contributions, but I would be glad to hear of other people's thoughts about this.

Dox

It's always worth having readily accessible cash outside a pension, especially in these insecure times.

MallyGirl

My numbers are similar to yours although my bonus is smaller and can't be sal sac'ed. I sal sac enough that the total pension contribution is £40k pa and I stay in basic rate tax. I also contribute £1k per month to a S&S ISA.I hope to retire at 58 or 59 so I need access to money that is not tied in to a pension. If I was made redundant I would use that as the catalyst to retire earlier.
Whilst there is no tax/NI benefit to ISA contributions it gives another income stream in retirement to enable you to manage the amount of tax paid.

Albermarle

The Annual allowance means that the max you can contribute to a pension in any one tax year is 40K.
This includes your contributions + any separate tax relief added ( not applicable in a salary sacrifice arrangement) + your employers contributions.
If this was a problem it is possible to bring forward previous years unused allowances , with certain caveats.

steampowered

While a pension is the clear winner if you want to use this money in retirement, it really depends on how you want to use the money.

For example, if you might want to use the money to buy a bigger house or go on nice holidays before you reach retirement, then an ISA will be the best option for achieving that.

There's no particular magic to "falling out" of the 40% tax band, especially since you'll be staying in that band anyway due to your buy-to-let. The 40% is only charged on amounts above the threshold.

Personally I've estimated what I think I need to live comfortably in retirement with the help of a pension calculator, I make sure I save at least that into my pension, and the rest into stocks & shares ISAs. I'm not quite sure what I want to use my ISA investments for yet but there is every possibility I might want to access them long before retirement.

Mds1978

Thanks everyone for the responses & advice. 

According to the Money Advice Service calculator I am saving enough into my pension for a comfortable retirement (when combined with the BTL income), so I will leave things as they are.  As people have said if some of my investments are outside my pension I have some flexibilty with when and how to spend it.