ISAs and pensions
The two main ways to save and invest without paying tax on the growth, explained simply, with calculators to try your own numbers.
An ISA and a pension both let your money grow without tax. The difference is when you can use it and who adds money. Here's how they compare.
ISAs
A tax-free box for savings and investments that you can usually get at any time.
- Who pays in: you. With a Lifetime ISA, the government adds 25%.
- Tax: no tax on interest, dividends or gains inside it.
- Getting your money: usually at any time. Lifetime ISAs have conditions.
- Yearly limit: £20,000 across all your ISAs in 2026/27.
Pensions
A long-term pot for later life, usually topped up by your employer and the government.
- Who pays in: you, your employer and the government, through tax relief.
- Tax: relief on the way in, no tax on growth, and income tax on most of what you take out.
- Getting your money: usually from 55, rising to 57 from 6 April 2028.
- Yearly limit: you get tax relief on payments up to your yearly earnings, and there's usually a £60,000 annual allowance.
Side by side
| ISA | Workplace pension | |
|---|---|---|
| Extra money added | Only with a Lifetime ISA: 25%, up to £1,000 a year | Your employer (at least 3% of qualifying earnings) plus tax relief |
| Tax on the way in | No relief. You pay in from taxed income | Tax relief, so £80 from your pay becomes £100 |
| Tax on growth | None | None |
| Tax on the way out | None | Usually up to a quarter tax-free (capped at £268,275), the rest taxed as income |
| When you can use it | Usually any time | From 55, rising to 57 from 6 April 2028 |
| Good for | Goals before retirement, and flexibility | Later life, especially with employer contributions |
Which comes first?
It depends on your circumstances, and this isn't advice. Many people follow the step-by-step route in our guides: build a safety net in cash, then make sure they're getting their employer's full pension contribution, then use ISAs for goals before retirement. Employer contributions are effectively extra pay, which is why they often come before other saving.
ISA calculator
See what regular saving into an ISA could grow to, how much of your allowance you'd use and, for a Lifetime ISA, how much the government would add.
- Paid in
- Government bonus
- Growth
Pension calculator
See what goes into a workplace pension each month, who pays for it, and what the pot could grow to by the time you can take it.
Each month
- From your take-home pay£0
- Tax relief from the government£0
- From your employer£0
- Total going in£0
How these calculators work
- They add your payments monthly and grow the balance each month at a rate that works out to the yearly growth rate you choose.
- They don't include fees, which reduce growth, or changes to your pay or the rules over time.
- The growth rate is an assumption you choose. The note under it shows how it compares with actual past returns over the last 10 years and longer.
- They're illustrations, not predictions or advice. Investments can fall as well as rise.
- Nothing you enter is stored or sent anywhere.
What returns have looked like
To help you choose a sensible growth rate, here's what different types of saving and investing have returned in recent years.
| Type | Average | Period | Notes |
|---|---|---|---|
| Cash in UK bank accounts | 0.8% a year | 2016 to 2025 | Average rate actually paid on households' instant-access balances (Bank of England) |
| Bank of England Bank Rate | 1.8% a year | 2016 to 2025 | Average over the period. It's 3.75% today |
| UK inflation (CPI) | 3.3% a year | 2016 to 2025 | How fast prices rose on average (ONS) |
| UK government bonds (gilts) | About 0% a year | 2016 to 2025 | Total return, in pounds |
| UK shares (FTSE 100) | 8.8% a year | 2016 to 2025 | Total return, in pounds |
| Global shares (MSCI World) | 12.6% a year | 10 years to 30 September 2026 | Total return, in pounds |
| Global shares (MSCI World) | 8.0% a year | End of 2000 to 30 September 2026 | Total return, in pounds, over a longer period |
| US shares (S&P 500) | 15.3% a year | 10 years to 30 September 2026 | Total return, in US dollars |
| Emerging markets (MSCI Emerging Markets) | 8.8% a year | 10 years to 30 September 2026 | Total return, in pounds |
Share and bond figures are total returns, with dividends and interest reinvested, before fund and platform fees and before inflation. Past performance is not a reliable guide to future returns. The S&P 500 figure is in US dollars, so a UK investor's return would also have depended on the exchange rate.
Go further
- Cash ISAs explained
- Stocks and shares ISAs explained
- Lifetime ISAs explained
- Workplace pensions explained
Sources
Checked on 9 October 2026. Rules and allowances can change, so always check the latest position on GOV.UK.
- GOV.UK: Individual Savings Accounts
- GOV.UK: Lifetime ISA
- GOV.UK: Workplace pensions
- GOV.UK: Pension schemes rates and allowances
- GOV.UK: Increasing the normal minimum pension age
- Bank of England: household sight deposit rates (series CFMHSCV)
- Bank of England: Bank Rate history
- ONS: CPI annual rate (D7G7)
- MSCI World and Emerging Markets index factsheet (GBP)
- S&P Dow Jones Indices: S&P 500
- iShares: FTSE 100 and UK gilts index calendar-year returns
This page is general information, not personal financial advice. Read our full disclaimer.