Page 13 - DIY Investor Magazine - Issue 25

‘YOU CAN SAVE TWICE AS MUCH INTO A PENSION, AS YOU CAN IN AN ISA’
When it comes to planning for your retirement, the tax relief top up makes saving into a SIPP a strong option.
SIPPs are used to combine multiple pensions to make it easier to keep track of them. You may want to consolidate some older pension plans, but don’t switch a current workplace pension.
Your employer is likely to contribute to this, and if you move you may miss out on these contributions, which can significantly boost overall returns.
You can save twice as much into a pension, as you can in an ISA, and the opportunity to earn more free money is greater.
Because the money in your SIPP comes with tax relief too this means more cash can be invested at an earlier stage, so you could potentially have a much larger pot at retirement.
However if you’ve got smaller sums to invest each year, a LISA could have much the same impact if you’re a basic rate taxpayer.
If you can afford to save into both, having an ISA means you will be able to access your savings earlier than age 55 (60 with a LISA) and you can leave your SIPP invested for longer. And having a blend of both can offer the best of both worlds.
SIPPS EXPLAINED
More pensions content here
ISAS EXPLAINED
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13 DIY Investor Magazine | Sept 2020