The difference
| Stocks and shares ISA | Personal pension (SIPP) | |
|---|---|---|
| Tax when you pay in | None. You pay in from taxed income | Tax relief: the provider adds 20% basic-rate relief |
| Tax on growth | None | None |
| Tax when you take money out | None | Up to 25% tax-free, the rest usually taxed as income |
| When you can take it out | Any time | Not normally before 55 |
| Yearly limit | £20,000 across all ISAs | Tax relief on up to 100% of your annual earnings |
The ISA rules are from GOV.UK.[1] The pension rules are from GOV.UK's pages on pension tax relief and on taking a pension.[2][3] A SIPP (self-invested personal pension) is a personal pension where you choose the investments yourself.
How pension tax relief works
When you pay into a personal pension, the provider claims tax relief from the government at the basic 20% rate and adds it to your pot. If you pay tax at a higher rate, you can claim the extra relief through Self Assessment.[2]
Example: you pay in £80. The provider adds £20 of basic-rate relief, so £100 goes into the pension.
What you give up
You cannot normally take money from a pension before 55. When you do, you can usually take up to 25% tax-free, and you usually pay tax on the rest.[3] An ISA has no such lock: you can withdraw at any time without tax.[1]
How people often combine them
- Workplace pension first, at least up to the level your employer matches. Employer contributions are money you would not otherwise get.
- ISA for money you may need before retirement, such as a home deposit or a career break.
- Pension for money you are sure you will not need until later life, where the tax relief is worth the lock.
Common questions
Can I use both?
Yes. The ISA allowance and pension tax relief are separate, so you can pay into both in the same tax year.
Does the index fund differ between an ISA and a SIPP?
No. The wrapper changes the tax, not the investment. The same global index fund can usually be held in either, depending on what your platform offers.
Sources & further reading
We cite independent authorities so you can verify everything yourself. Last reviewed 15 Sept 2026.