Which is better NISA or pension? That really shouldn’t be the question

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So will the NISA with its new superpowered £15,000 limit eclipse the pension? Should you as an investor be investing most of your hard earned cash in the new wrapper?

It certainly sounds like the NISA has much to recommend it. Towry is the latest firm to calculate just how quickly you could become a NISA millionaire – 20 years for a couple – and much faster than the ISA. You have to, of course, put more money is as well.

The answer however to the perennial either or question is actually that it depends. If you are picking up contributions from your employer either under auto-enrolment or an existing pension arrangement then it makes a lot of sense to be in that pension.

For when you decide to take an income, the pension now gives you more freedom to withdraw your money or leave it invested in what is effectively mini-drawdown, so actually it has got more appealing – subject of course to your marginal rate of tax.

In addition, on the way in, the pension attracts tax relief which the NISA of course does not.

Ask a financial adviser or planner and they will say both have their uses and indeed the recent Budget reforms have made both more appealing.

If you are a self directing investor, even one who has always sworn by the Isa, the pension reforms around annuities might even give you pause for thought.

The real answer to the question is whatever suits you and your circumstances best.

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  • Noo 2 Economics

    “If you are a self directing investor, even one who has
    always sworn by the Isa, the pension reforms around annuities might
    even give you pause for thought.”

    That just leaves the little problem of the enormous admin charges
    on a Self Invested Personal Pension – admittedly not that much of a
    problem once you have built up a 100k pot, but the admin charges
    remain in place, whereas they just aren’t there in a NISA……