SIPP or Stocks & Shares ISA

Tom2023

My daughter has a sad little pension with the company she works for. As she's 30 I suggested she got herself a SIPP and started contributing from her salary to get tax relief.


She tells me that she has been told a stockes and shares ISA is a better investment.

Could someone say which is the best and why.

TIA

Dazed_and_C0nfused

Pensions and S&S ISA's aren't investments, they are the wrapper that investments are held in.

The vast majority of mainstream investments can be held in either a pension or S&S ISA.

A basic rate payer now who expects to pay basic rate tax on the pension gets a 6.25% advantage from choosing the pension (20% tax relief on the way in but tax is only paid on 75% of the fund on the way out).

Marcon

Tom2023 said:

My daughter has a sad little pension with the company she works for. As she's 30 I suggested she got herself a SIPP and started contributing from her salary to get tax relief.


She tells me that she has been told a stockes and shares ISA is a better investment.

Could someone say which is the best and why.

TIA

Told by whom and what was their reasoning?

Neither is necessarily 'best' - depends entirely on circumstances and objectives. A pension won't help a 30 year old who needs an emergency fund for a rainy day, whereas an ISA is all too accessible for a 30 year who really likes the look of that beach holiday...!

What's stopping your daughter from contributing more to her 'sad little pension'? It's probably only sad because not much is being paid in. If her employer offers salary sacrifice for contributions to their scheme (they are highly unlikely to do so for a SIPP she sets up), she'll get a saving on her NI as well as tax relief.

squirrelpie

Just to complicate matters, as she's 30 she's also able to open a LISA or Lifetime ISA. That offers yet another set of incentives and restrictions to think about.

As already said, what is best depends on her circumstances and plans.

dunstonh

She tells me that she has been told a stockes and shares ISA is a better investment.

If she was told that before 2016 then there is a good argument to say it was correct.  However, post 2016 with the rule changes, that is no longer correct.

Different scenarios could make either the best option but for pure retirement planning and assuming no issues over lifetime allowance, then pension trumps ISA.   However, LISA trumps both of them in all probability.

Tom2023

Thanks for all the advice.

My daughter is going to up her pension contributions and swap her neglected cash LISA for a stocks and shares LISA, probably with Moneybox, and I'm going to pay into that and see what happens.