This page runs the same £1,000 of gross pay through a pension, an ISA and a Lifetime ISA, for each combination of tax band now and tax band in retirement. It exists because the honest answer is a table, not a slogan, and most versions of this argument skip the half of the table that decides it.
Every pound of pay passes through up to two tax gates: one on the way in, one on the way out. A pension skips the gate on the way in and pays on the way out, with a quarter waved through free. An ISA pays on the way in and skips the gate on the way out. A Lifetime ISA pays on the way in, then the state adds 25% back.
So the comparison is not "pension versus ISA" in the abstract. It is your tax band today versus your likely band in retirement, plus three things that sit outside the arithmetic: an employer match, the age locks on each wrapper, and two rule changes with dates attached. The table below does the arithmetic; the sections after it do the rest.
Read your row: your tax band today. Then compare columns: what the same £1,000 of pay turns into as spendable money, assuming identical investments and growth in every wrapper (growth multiplies both sides equally, so it cancels out of the comparison).
| Your band today | Pension, retiring basic-rate | Pension, retiring higher-rate | ISA | Lifetime ISA (under 40 to open) |
|---|---|---|---|---|
| Basic rate (20%) | £850 | £700 | £800 | £1,000 |
| Higher rate (40%) | £850 | £700 | £600 | £750 |
| Additional rate (45%) | £850 | £700 | £550 | £687.50 |
Three honest readings. First, the pension's edge is the band drop: most people are a band lower in retirement than in work, and "in at 40%, out at 20%" is where the £850 against £600 gap lives. Second, for a basic-rate earner under 40 the Lifetime ISA matches or beats the pension on pure arithmetic (£1,000 against £850), within its £4,000-a-year limit, because the 25% bonus mirrors basic-rate relief and withdrawals after 60 are entirely tax-free. Third, someone who retires into the same band they contributed from still ends ahead in a pension (£700 against £600 at higher rate), and that whole edge is the tax-free quarter.
One refinement the table leaves out to stay readable: if the pension contribution goes in by salary sacrifice, the ISA comparison worsens further, because the pay you would have taken home also loses National Insurance (8% below £50,270, 2% above). A basic-rate earner's ISA column drops from £800 to £720 against sacrifice. The 2029 cap on sacrifice relief Enacted is covered on the stop-signals page.
Information and guidance only. Not personal advice. The table shows tax arithmetic for 2026/27 rates on stated assumptions, not a recommendation of any wrapper for you. Whether pension or ISA suits your situation depends on circumstances this page cannot see, including means-tested benefits, existing allowance usage and when you need the money. Investment values can fall as well as rise and you may get back less than you put in. Tax treatment depends on individual circumstances and can change. Verify decisions with a qualified FCA-authorised adviser before acting.
If your employer matches contributions you have not yet claimed, the wrapper debate is premature. A matched £1,000 puts £2,000 to work; even drawn at basic rate later, that is £1,700 of spendable money from £1,000 of pay.
£1,700 against the £800 or £600 an ISA turns the same pay into. No ISA bonus, band drop or fee saving comes close, which is why every sensible ordering puts "capture the full match" before the pension-or-ISA question, not after it. The one caveat is the usual one: pension money is locked until at least age 57 from 2028, so money you may need before then belongs elsewhere regardless of the arithmetic.
The table compares end states. The wrappers differ just as much in what happens between now and then, and two rule changes carry dates.
| Pension | ISA | Lifetime ISA | |
|---|---|---|---|
| Access | Age 57 from April 2028 (currently 55) | Any time | First home up to £450,000, or age 60; other withdrawals lose 25% of the amount taken |
| Annual limit | £60,000 annual allowance (less if tapered or MPAA applies) | £20,000 | £4,000 (counts inside the £20,000) |
| On death | Inside the estate for inheritance tax from 6 April 2027 Enacted | In the estate (spouses inherit the allowance) | In the estate |
| Means-tested benefits | Generally ignored before access age | Counted as savings | Counted as savings |
The death row deserves a sentence, because it moved. Until 5 April 2027 an unspent pension usually passes outside the estate; from 6 April 2027 it is counted in, which removes the pension's old inheritance advantage over the ISA and can stack two taxes on the same pot. That change is law (Royal Assent 18 March 2026) and has its own page with the worked table. The Lifetime ISA's 25% withdrawal charge is also worth reading precisely: taking £1,000 out early costs £250, which claws back the bonus and a slice of your own money with it.
The rows that decide this are your marginal rate today, which is not always your headline band, and your likely rate in retirement, which depends on your state pension, other income and how you draw.
Between £100,000 and £125,140 the effective rate on extra pay is around 60% before National Insurance, which turns the pension's "in" gate into a much bigger discount than the table shows. At the other end, someone whose retirement income sits inside the personal allowance draws pension money at 0%, turning £1,000 of pay into the full £1,000. The Sonuswealth engine reads your recorded income, contributions and pots and runs this same comparison on your actual marginal rates rather than a band label.
Every figure below is produced by the same engine the app runs. Drag the salary through £100,000 and watch the pension bar jump: that is the personal allowance being withdrawn, which is why the effective rate peaks there and falls back after £125,140.
Why these figures are larger than the table above. The table starts from £1,000 of gross pay, before any tax is taken, and leaves National Insurance out. What follows starts from £1,000 of take-home pay — what the saving actually costs you — and counts the National Insurance saved through salary sacrifice. Same arithmetic, different starting line, so the two sets of numbers should not be read side by side.
Methodology. All routes start from £1,000 of gross employment income. Pension route: full £1,000 contributed (via sacrifice or grossed-up relief at source), drawn as 25% tax-free cash plus 75% taxed at the stated retirement band. ISA route: income tax at the stated band on the way in, no tax on the way out. Lifetime ISA route: taxed pay in, 25% government bonus added, no tax on the way out, £4,000-a-year limit, opened before age 40. National Insurance excluded from the main table and shown separately where noted. Rates and limits from rules bundle UK-2026.1.1 (tax year 2026/27): 20%/40%/45% bands, 25% tax-free cash, £20,000 ISA and £4,000 LISA allowances, £60,000 annual allowance, access age 57 from April 2028, pension-in-estate from 6 April 2027. All arithmetic machine-checked before publication. Published 8 August 2026 · figures last verified 8 August 2026.
Sonuswealth is pre-launch. The app runs this comparison on your own marginal rates, match and allowance headroom, kept current as rules change.