Chris Exley DipFA Creator of MoneyGeek | Financial Coach | Planner

MoneyGeek Digest - Issue 17: Where does my next £100 go? ISA vs Pension

Dear Reader,

Before I kick off this issue of the digest - there are around 500 new subscribers this week - many are asking for my modelling tool. I built this out on Google Sheets - you can check it out here:

This year, i've met with well over 200 families all taking the right steps towards financial freedom - but I still see people bogged down by the same decision making bottlenecks.

And whenever I run a Q&A on Instagram (every Monday), the same question arises again and again...

And you would think that as tax treatment of these accounts change, so does the decision making process.

But I encourage people to take a step back and re-frame the decision making process.

Most people start with now. They look at which account offers them the quickest win - often the pension wins due to tax relief.

Instead, I do this:

1. List goals (e.g. passive income of £3k/mo from age 60, holiday of a lifetime at age 50 etc)
2. Price these goals up - how much will they cost - and how big a fund will you need to get there
3. Allocate savings accordingly to the most appropriate account so goals can be met

Because the right account isn't just about efficiency today.

It's about efficiency now and in the future, and there is no use in overfunding a pension when you'll need the money before it can be accessed (57 from 2028 - subject to some exceptions - more on that another time).

So here's how the accounts actually earn their place.

If a goal lands before you can reach pension age — a house move, a career break, that holiday at 50, helping the kids — the ISA is the obvious vehicle that does the work.

You can get to it any time, and there's nothing to pay when you draw it.

Flexibility is the entire point.

If a goal sits in retirement — say that £3k a month from 60 — the pension does the heavy lifting. The tax relief is hard to beat: every £100 paid in costs a basic-rate taxpayer £80, and a higher-rate payer just £60.

A quarter comes back tax-free later, and the rest is taxed as income.

Drop a tax band by the time you retire, and that gap becomes even more lucrative.

Match the account to the goal, and the "next £100" question mostly answers itself.

Two changes coming in April 2027 make getting this right matter even more.

From 6 April 2027, the cash ISA cap falls to £12,000 a year for under-65s. The £20,000 overall allowance stays — but the balance has to be invested rather than left in cash. For any goal more than five years out, that's no bad thing.

From the same date, unused pension pots start counting towards inheritance tax — 40% above the £325,000 threshold (spouse exemption and Residence Nil Rate Band applies).

Pensions are still excellent for funding your retirement. They're just no longer the tool to pass money on that they once were.

Which brings me back to where I started. Don't ask which account wins today.

Ask what you're saving for, when you'll need it, and let that decide where the money goes.

Every pound should have a job. Give it one.

If you'd ever like help pricing up your goals and matching them to the right accounts - that's exactly what a plan is for, and it's what I do all day.

Tools to help you do just that coming soon.

As always — education, not advice.

Until next time,

Chris