Pensions or ISAs

ISAs enable one to receive tax free income…

However with the tax breaks available for making pension contributions at present this might be an alternative consideration. Even without any earnings everyone is entitled to contribute £3,600 into a pension fund each year. After basic rate tax relief at source the net cost is £2,880 and this grows in a tax-free environment.

Timing the extraction of the funds and making use of the 25% tax free lump sum can result in a decent return obviously subject to risks compared with say putting the money in a cash ISA.