Investment ISA vs SIPP

In todays video we will be comparing Investment ISAs (Stocks and Shares ISA) with Self Invested Personal Pensions (SIPP) and discussing the pros and cons of each.

When can I access the money?

With an Investment ISA you can take money out at any time, whereas you can only take money from a SIPP when you’re 55 and this rises to 57 in 2028.

How much can you contribute?

In an investment ISA you can contribute £20k each tax year.

In a SIPP you can contribute 100% of your annual income each tax year, up to the maximum annual allowance of £60,000. 

What happens with Tax?

Investment ISA

When you invest in a Stocks and Shares ISA, there's no income tax to pay on any dividends or interest generated, and no capital gains tax if you make a gain when you sell your investments.

SIPP

Provided you're a UK resident and under the age of 75, if you put money into a personal pension or Self Invested Personal Pension you'll be able to get a top-up from the government. It's called 'tax relief' and is paid directly into your pension plan. Tax relief is given in this way at the basic rate of income tax, which is currently 20%. So if you put £800 into your SIPP you would receive £200 from the government.

Higher and additional-rate taxpayers can claim back a further 20% and 25% respectively via the self-assessment process. The first 25% can be taken as a tax-free lump sum. The remainder of the drawdown pot is taxed like normal income when you withdraw it.

Investing Qualifications I hold:

International Certificate in Wealth and Investment Management (Chartered Institute for Securities & Investment)

***Books I've Enjoyed***

I make videos on investing, personal finance, growing wealth, financial independence, budgeting and saving money. Let me know in the comments what you’d like to see next!

DISCLAIMER

Any information given in this video is for entertainment purposes only, and does not act as legal or financial advice. Your financial decisions are your own responsibility, and if you do require advice please contact a qualified Financial Adviser, Wealth Manager or Financial Planner.

[creatingbalancefinance]

An investment ISA or a SIPP or both?! What are your thoughts?

[darude]

ISA as well only. I did work out there would be about 15% extra gains if i choose to invest in SIPP instead but the freedom to access the funds in full is more important to me, however i do also fully contribute to a LISA

[jacc]

I have both but interested to know which is most likely to make you the most money over a long period - The ISA with no tax or the Sipp with 20% extra added every time you pay into it but with tax having to be paid on 75% of the amount when you draw it down?
EDIT: I worked out that over a long period of time (35 years) the Sipp is better but over 15 years they are roughly the same!

[thebesttheworst]

ISA only for now, more freedom and I can only see that restriction age increasing to 65 or more as the years tick by.

[anikdasdigital]

nice content but Seo score is very low.

[macthesax]

your "can" at 0.30 sounds very like "can't" have....

[nachi]

I fear the 57-year age limit would be increased, and by the time i retire, it would be 70 and i dont think i would live that long.😂 Though SIPP is good way to save tax specially if you are in the 40% bracket.