Pension vs ISA Calculator
Compare £20,000 a year into a pension vs an ISA. Built for UK rules from 2026/27 onwards — including the April 2027 pension IHT change, the £2,000 salary sacrifice NI cap from April 2029, and frozen tax thresholds to April 2031.
Answer five quick groups of questions. We'll project your pension and ISA side-by-side under the latest UK rules — frozen tax thresholds to 2031, the £2,000 salary sacrifice cap from April 2029, and pensions joining the IHT estate from April 2027 — then show you who wins on cost, retirement income, and legacy.
1About you
Your timeline and salary determine the marginal tax rate that drives the pension's relief.
2Current balances
Existing pots seed the simulation and compound from year one. Leave at £0 if you're starting fresh.
3Contribution
Same gross amount paid into either wrapper each year — we'll show the net cost difference.
4Investment assumptions
Long-run growth and inflation. Defaults reflect typical balanced-portfolio assumptions.
5Retirement & legacy
How you'll spend it and who'll inherit anything left.
Nothing is stored — everything is calculated in your browser.
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Headline comparison
Pot at retirement
Net cost over working life
Net retirement income (annual)
Net to heirs at death
Year-by-year accumulation
Net wealth over your whole life (after tax)
Death scenario breakdown
Die before 75 · pre-2027 rules old
Die before 75 · post-Apr 2027
Die after 75 · post-Apr 2027
Sensitivity — break-even on growth rate
| Growth % | Pension pot | ISA pot | Pension net legacy* | ISA net legacy* | Winner |
|---|
How the maths works
Tax engine. Marginal rates calculated from 2026/27 bands (frozen to 2030/31): personal allowance £12,570, basic rate to £50,270 (20%), higher rate to £125,140 (40%), additional rate above (45%). PA tapers £1 per £2 between £100,000 and £125,140 — making the £100k–£125,140 zone effectively 60% income tax. Employee NI: 8% to £50,270, 2% above. Employer NI: 15% above £5,000.
Starting balances. If you enter existing ISA or pension values, they're treated as today's pot and compound at the chosen growth rate alongside fresh contributions. pot[0] = current_balance.
ISA accumulation. Contributions paid from net (post-tax) income. Pot grows tax-free. pot[t+1] = (pot[t] + £20k) × (1 + g).
Pension accumulation. £20k gross in. Net cost depends on funding mode and tax band:
- Salary sacrifice (pre-Apr 2029): net cost = gross × (1 − marginal IT − employee NI). Higher rate: 58p per £1. If employer adds back its 15% NI saving, pot grows on £20k × 1.15 each year.
- Salary sacrifice (post-Apr 2029, contributions > £2k): first £2k retains full NI relief; above £2k loses NI relief on both employee and (if relevant) employer side. For a higher-rate earner contributing £20k, net cost rises from £11,600 to ~£11,960 a year.
- Personal contribution (relief at source): net cost = gross × (1 − marginal IT). No NI relief. Provider grosses up at 20% automatically; higher/additional rate relief claimed via tax return.
Retirement drawdown. 25% tax-free up to LSA cap (£268,275). Remainder treated as income, taxed at the bands above (no NI on pension drawdown). ISA withdrawals tax-free. Sustainable withdrawal calculated to deplete to planning age at the chosen growth rate.
Death scenarios. Three regimes modelled:
- Die before 75, pre-Apr 2027: pension passes IHT-free and income-tax-free to beneficiaries. ISA in estate (40% IHT above NRB+RNRB).
- Die before 75, post-Apr 2027: pension in estate (40% IHT) but beneficiary takes remainder tax-free → keeps 60%. ISA: 40% IHT.
- Die after 75, post-Apr 2027: 40% IHT first; remainder taxed at beneficiary's marginal income tax rate. With double-tax mitigation (the income tax base reduced by the IHT amount), effective tax tops out at ~67% for an additional-rate beneficiary.
Real vs nominal. When "Today's money" is selected, growth and bands are deflated by inflation, so all £ figures are in current purchasing power.
Assumptions & what's in the maths
- Tax bands held flat in nominal terms — frozen until April 2031, then inflated.
- ISA allowance £20,000/year. Pension annual allowance £60,000 (no taper modelled for very-high earners).
- LSA £268,275 enforced when 25% tax-free lump sum is taken.
- NRB £325,000 + RNRB £175,000 (£500k individual). RNRB tapers above £2m estate — not modelled.
- Spouse exemption not modelled (assumes inheritance to non-spouse).
- Investment growth applied annually at year-end on contributions.
- Charges/fees not modelled — apply identically to both wrappers anyway.
- State pension not modelled (would shift income into both bases equally).
- April 2027 reduction in cash-ISA cap to £12k under-65 not modelled (overall £20k still applies via S&S ISA).
This is a planning tool, not advice. Tax rules can change; always cross-check with a qualified adviser before acting.
What changes from April 2027 (and 2029)
April 2027 — pensions in IHT estate. From 6 April 2027, unused pension funds and most lump-sum death benefits join the estate for IHT. Spouse and registered-charity transfers remain exempt. Personal representatives become responsible for reporting and paying the IHT.
April 2027 — cash ISA limit. Cash-ISA subscription reduces to £12,000 for under-65s (overall £20,000 ISA allowance unchanged via stocks & shares ISA). Not modelled here as the headline allowance is unchanged.
April 2029 — £2,000 salary sacrifice NI cap. Only the first £2,000 of pension contributions made via salary sacrifice each year qualify for full NIC relief. Above that, employee NI (8% / 2%) and employer NI (15%) apply. Modelled here for any year ≥ 2029.
April 2031 — frozen tax thresholds extended. Personal allowance, basic rate limit, higher rate threshold, and additional rate threshold all held flat in cash terms — fiscal drag pulls more retirement income into higher bands over time.