When you start investing, if you're a UK resident you should aim to do so either within an Individual Savings Account, better known as an Isa, or in your pension - which most people automatically pay into when they work for a company.
Isas enable you to grow your savings free of tax. For most Isas, you can access your money at any point with no tax payable.
Pensions benefit from tax relief on any money paid in, at your marginal income tax rate. When you draw down from your pension, you pay income tax at your marginal rate (while receiving 25 per cent tax free).
Pensions are generally seen as the more generous tax vehicle, if you're happy to lock your money away until you're in your late fifties (the pension age is creeping up). So saving into both where possible can be the best strategy.
Download the third guide in our Investing explained series to learn about the different types of Isa and pensions available, how much you can pay into each and how to use them most effectively.
This guide includes:
- Isa overview
- Stocks and shares Isa
- Lifetime Isa
- Innovative finance Isa
- DC pensions and DB pensions
- Sipps
- How to pick between pensions and Isas
Or listen to our podcast, where the IC's Mary McDougall chats with IG's Jeremy Naylor and Svenja Keller, financial coach and founder of SK Inspire, about the nuances of tax-efficient investing.
They talk through the different types of Isas and pensions available, the pros and cons of different options and how to prioritise between them.
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This article is sponsored by IG.
