How to Use the ISA vs Pension Calculator

This free UK calculator asks one question: if you have the same surplus pound, which wrapper leaves you better off after pension tax relief, the 25% tax-free lump sum and tax on withdrawals? It compares a Stocks & Shares ISA, a defined-contribution pension and a Lifetime ISA path using 2026/27 rates.

Step-by-step

1. Choose the comparison

Same net surplus: you already have the money after income tax (for example £10,000 in your current account).
Same gross earnings: you earn an extra amount before tax. The ISA path invests what is left after your current marginal rate; the pension path uses relief at source or salary sacrifice.
Use a one-off lump or the same amount each year until withdrawal.

2. Set growth and your tax position

Growth is tax-free inside an ISA, LISA and pension, so the same rate is applied to all three.
Pick England, Wales & NI or Scotland. Scottish bands (starter 19% through top 48%) apply to income tax now and to pension withdrawals later. ISA/LISA withdrawals stay tax-free.
Relief at source always adds 20% into the pot. Higher, additional and Scottish rates above 20% are claimed through Self Assessment. With Reinvest extra relief on (the default), that reclaim is paid into the pension too.
Salary sacrifice also avoids employee NI on that pound. Optionally recycle the employer’s 15% Class 1 secondary NI (2026/27) into the pot.

3. Read the withdrawal maths

Pension net ≈ 25% tax-free (capped by LSA £268,275) + 75% − income tax

Tax on the taxable 75% is calculated on top of “other taxable income in retirement” using 2026/27 bands, including the personal-allowance taper above £100,000. Default other income of £12,570 uses up the allowance (a typical State Pension-shaped placeholder) so further withdrawals start in the basic-rate band.

The LISA path puts up to £4,000 per year into a Lifetime ISA (25% bonus) and, if you leave the overflow box ticked, the rest into a normal ISA. A 25% withdrawal charge applies unless the withdrawal is qualifying (age 60 or a first home of £450,000 or less).

Worked examples (no growth, to isolate tax)

A. Basic rate now, basic rate later — same net £800

The classic “25% lump sum is the only edge” case.

ISA keeps £800. Pension pot £1,000 after 20% relief. PCLS £250 + £750 taxed at 20% = £600 → pension net £850.

Pension wins by £50 on £800 of surplus — about 6% — solely because of the tax-free lump sum.

B. Higher rate now, basic rate later — same gross £1,000

The 40% in / 20% out arbitrage.

ISA invests £600 after 40% tax. Pension pot £1,000. After doubling for illustration: ISA £1,200 vs pension £500 tax-free + £1,500 × 80% = £1,200 → pension net £1,700.

Pension wins decisively when you claim higher-rate relief and withdraw in the basic-rate band.

C. Basic rate now, higher rate later — PCLS on

When the ISA can win on tax alone.

Same net £800, pot doubles to £1,600 ISA vs £2,000 pension. PCLS £500 + £1,500 taxed at 40% = £900 → pension net £1,400.

ISA wins if you expect to withdraw the taxable 75% at a higher rate than the relief you received on the way in.

When each wrapper usually wins

Pension: employer match, salary sacrifice, or a higher rate now than in retirement. Always take any employer match first — it is an immediate return the ISA cannot copy.
ISA: you need the money before the minimum pension age (55, rising to 57 from 6 April 2028), or you expect a high tax rate on withdrawals.
LISA: you can use a qualifying withdrawal and you are putting in no more than £4,000 a year. For a basic-rate saver the 25% bonus equals 20% pension relief; the ISA-style tax-free exit then beats a pension unless the pension’s 25% PCLS plus a lower retirement rate wins overall. Higher-rate savers usually still prefer a pension on the first pounds that attract 40% relief.

Disclaimer & limitations

Not professional advice: this is an educational estimate, not a personal recommendation. Rules, bands and allowances change. Confirm current figures on GOV.UK and speak to a regulated adviser if you need advice.

2026/27 assumptions: rUK bands 20% / 40% / 45% with personal allowance £12,570; Scottish starter to top rates as enacted for 2026/27; ISA allowance £20,000; LISA £4,000 + 25% bonus; pension annual allowance £60,000; Lump Sum Allowance £268,275; employee NI 8% / 2%; employer NI 15% above the £5,000 secondary threshold. Tapered annual allowance, MPAA, protected lifetime-allowance figures and carry-forward are not fully modelled — warnings only.

Access and IHT: pensions generally cannot be accessed before the normal minimum pension age. Unused pension funds are expected to fall inside the estate for inheritance tax from 6 April 2027. ISAs remain in the estate today.

Growth: the same constant rate is applied to all wrappers. No fees, no inflation, no contribution holidays, no sequence-of-returns risk.

Bug reports and suggested improvements

Please email suggestions and bug reports to: isavspensioncalc@personalfinances.me, thank you.

ISA vs Pension Calculator – Same Surplus Pound (UK)

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