You’re better off with an Isa than a pension

Merryn Somerset Webb explains the benefits of keeping your retirement fund in an individual savings account.

At MoneyWeek we have long favoured saving into individual savings accounts (Isas) over saving into pensions. There are all sorts of reasons for this. But the main one has long been the simplicity of Isas. You put the money in after you have paid tax on it. Then once it is in its wrapper, it is safe. You don't have to fill in any forms or reclaim anything from the taxman. And you can withdraw the capital gains and the income from an Isa any time you like without paying further taxes.

Pensions just aren't as good. Again, there are all sorts of reasons why we say this. But there is one main one: uncertainty. Take the tax relief. It sounds attractive. But pension saving doesn't let you avoid paying tax. It just allows you to defer it. When you take income or capital as income from your pension later as drawdown or annuity payments you will be taxed at income-tax rates. They might be lower than the current rates. They might also be higher. Who knows?

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.