Next month's increase in the annual savings limit and more flexible access are among the attractions that could see the ISA overtake the pension as the retirement-planning tax wrapper of choice, according to research by Metlife.
The life insurance company suggested the increase in interest in ISAs for retirement planning was being driven by a switch in consumer attitudes following pension freedom as well as the upcoming increase in the annual allowance from £15,240 to £20,000.
Metlife's research found more than three-fifths (63%) of retirement specialist advisers welcomed the greater flexibility of ISAs and had changed their recommendations on using them in retirement planning while just over a third (34%) of savers said they preferred ISAs to pensions as a route to generating income in retirement.
The research highlighted a lack of knowledge when it came to the options available when using an ISA, however, as two-thirds (66%) use cash ISAs, the best interest rates on which still tend to be below 2%. Just 10% said they were happy with the rates they receive while more than half of cash ISA savers (55%) were dissatisfied with rates.
MetLife wealth management director Simon Massey said: "The ISA's annual allowance increase highlights how much can be saved tax-free, making it a real option now for retirement planning.
"But it is worrying that, with so much ISA saving focused on cash ISAs, so few savers are happy with the rates they are earning. That said, it is understandable many are nervous about investing their money in a traditional stocks & shares ISA when markets are uncertain."
He added: "ISAs attracted more than £58bn in contributions last year and the rise in contribution levels will provide another boost, but there has to be real choice aside from the higher-return but riskier stocks & shares ISAs versus the low rates of cash ISAs."
Saga Investment Services financial planner Amanda Cook said the choice still comes down to individual circumstances, as similarities do exist between the two.
Both grow free of income tax and capital gains tax, neither incur capital gains tax when they are accessed and both can be used to invest in a range of different assets such as cash, shares, bonds and commercial property, she said.
As pensions generally sit outside the estate when calculating inheritance tax liability, however, that can make them a popular choice for those wanting to pass on wealth. Also unlike ISAs, people can benefit from tax relief on their pension contributions but, on the downside, the income taken from them is subject to income tax.
In contrast, any income taken later from ISAs is tax-free and the more flexible access ISAs provide to savings, if needed before the age of 55, can be a further draw.
As such, Cook suggested a combination of the two can often be the best approach, adding: "People should consider a pension if they don't need access to the money before the age of 55 but they should always think about the bigger picture, working with a financial planner to achieve goals."
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