Why a pension could be your most powerful next move
ISAs are often the first place people start investing – and for good reason. They’re flexible, easy to understand, and great for building wealth over time. But once your ISA allowance is used, or if you’re thinking longer term, a pension can be one of the most powerful next steps.
The biggest advantage of a pension is tax relief. When you contribute, the government adds money to your pot. For basic-rate taxpayers, that means every £800 you pay in becomes £1,000 invested. Higher-rate taxpayers can benefit even more.
In the Moneybox app, tax relief is added automatically to your pension contributions, so you see the boost without needing to claim it yourself.
This immediate uplift gives pensions a head start that few other financial products can match. Over time, that extra money compounds, meaning your future self benefits not just from what you saved, but from what the government added too.
Pensions also come with a generous annual allowance. Most people can contribute up to £60,000 per year (or 100% of their earnings, whichever is lower). There’s also the option to use unused allowance from the previous three tax years through a rule called carry forward.
This makes pensions particularly useful if your income increases, you receive a bonus, or you want to make a one-off contribution.
The main trade-off is access. Pension money is locked away until later in life, which means it’s not suitable for short-term goals. But for money you genuinely don’t need for decades, this restriction can actually be helpful – it protects your future from present-day temptation.
Many people use both ISAs and pensions together. ISAs provide flexibility for medium-term goals, while pensions focus on long-term security.
Top up today if you can to make the most of this year’s tax-free allowance before it resets. ISA and tax rules, and account T&Cs apply. If investing, capital at risk.