From the earliest days of Monevator I’ve betrayed a soft spot for income investing. My 2008 article at the end of that link doesn’t claim pursuing income will beat the market. But I did suggest it might be a mental better fit for some people in retirement.You discount psychology in investing at your peril.
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Hot: A portfolio for life: the natural yield approach to drawdown [Members]
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Learn how to achieve financial independence, retire early, and build wealth on your terms. Join Paula Pant's community for actionable advice on investing, real estate, and money psychology.
⇄⧉public rendered -> UTF-8 string (55752) "<p><span class="drop_cap">S</span>hould you invest in a pension or an ISA? I...
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<p><span class="drop_cap">S</span>hould you invest in a pension or an ISA? Is there a decisive answer to the eternal SIPPs vs ISAs question?</p>
<p><span class="s1">Well… almost. </span><span class="s1">We can make a few immediate statements that provide clear direction – although the decision tree gets pretty thorny after that:</span></p>
<ul class="wp-block-list">
<li>If you hope to live off your investments <em>before</em> your minimum pension age<a href="#footnote_0_27384" id="identifier_0_27384" class="footnote-link footnote-identifier-link" title="The Normal Minimum Pension Age will be 57 for most people from 5 April 2028.">1</a> then a stocks and shares ISA is the clear winner. </li>
</ul>
<ul class="wp-block-list">
<li>Employer pension contributions are an unbeatable leg up. Take them, take them, take them. It’s free money, unless you plan on dying a rock ‘n’ roll death. (Pro tip: <a href="https://monevator.com/why-your-life-expectancy-is-much-longer-than-you-think/" target="_blank" rel="noreferrer noopener">almost nobody does</a>.)</li>
</ul>
<p>Otherwise, much depends upon if you’re contributing to your SIPP (or other pension type) at the higher-rate of income tax or at the basic rate:</p>
<ul class="wp-block-list">
<li>Paying higher-rate tax? Then <a href="https://monevator.com/rich-optimal-pension-contributions/" target="_blank" rel="noreferrer noopener">prioritise your pension</a> accounts over ISAs. </li>
</ul>
<ul class="wp-block-list">
<li>Paying basic-rate tax? Then the choice between a SIPP and a Lifetime ISA (LISA) is finely poised. We delve deeper into this below. </li>
</ul>
<ul class="wp-block-list">
<li>If you’re a young basic-rate taxpayer who won’t retire until State Pension age, an ISA may beat a SIPP in certain scenarios. Again, we’ll explain more below. </li>
</ul>
<p>The Kong-sized caveat to all this is that future changes to the tax system may move the SIPP vs ISA goalposts.</p>
<h3 class="wp-block-heading">Goalposts on wheels</h3>
<p><em>Tax-strategy diversification</em> can help you address the uncertainty. It involves you employing several different tax shelters, irrespective of their current pecking order.</p>
<p>Spreading your savings across various tax shelters is particularly sensible for young people for whom retirement is decades away. But the technique is worth everyone else considering too, because SIPPs and ISAs hedge against different tax risks. We’ll talk about that in a sec.</p>
<p>To set the scene, let’s first recap what ISAs and SIPPs have in common – and what sets them apart. </p>
<p class="note"><strong>Terminology intermission: </strong>I mostly talk about SIPPs in this article but the conclusions apply equally well to other defined contribution (DC) pensions, such as Nest-style auto-enrolment <a href="https://monevator.com/what-is-a-master-trust-pension/" target="_blank" rel="noopener">Master Trust Pensions</a>. I’ll use the term ISAs to refer to all ISA types, except for the LISA. I’ll mention the LISA when its special features alter the SIPP vs ISA comparison.</p>
<h2>SIPPs vs ISAs: these things are the same</h2>
<p>SIPP or ISA? There’s nothing between them on the following counts:</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Tax shelter / feature</td>
<td class="Tab_Rowhead">SIPP</td>
<td class="Tab_Rowhead">Stocks and shares ISA</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">No tax on dividends</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">No tax on interest</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">No tax on capital gains</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Invest in funds, ETFs, bonds, shares</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Ceiling on lifetime tax-free income</td>
<td class="Tab_ColGeneral">No</td>
<td class="Tab_ColGeneral">No</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Versions for children</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
</tbody>
</table>
<h2>SIPPs vs ISAs: these things are different</h2>
<p>ISA or SIPP? Well, on the other hand…</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Tax shelter / feature</td>
<td class="Tab_Rowhead">SIPP</td>
<td class="Tab_Rowhead">Stocks and shares ISA</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Free of income tax on withdrawals</td>
<td class="Tab_ColGeneral">No</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Income tax relief on contributions</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">No</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Tax relief on National Insurance</td>
<td class="Tab_ColGeneral">Yes, with salary sacrifice</td>
<td class="Tab_ColGeneral">No</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">25% tax-free cash on withdrawal</td>
<td class="Tab_ColGeneral">Yes, up to £268,275</td>
<td class="Tab_ColGeneral">N/A</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Access anytime</td>
<td class="Tab_ColGeneral">No</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Annual limit on contributions</td>
<td class="Tab_ColGeneral">£60,000</td>
<td class="Tab_ColGeneral">£20,000</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Employer contributions</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">No</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Inheritance tax exempt</td>
<td class="Tab_ColGeneral">Only until April 2027. Fine if passed to spouse</td>
<td class="Tab_ColGeneral">If passed to spouse,<br />otherwise no</td>
</tr>
</tbody>
</table>
<p class="p1"><span class="s1">As you can see, a SIPP gathers more ‘Yes’ votes than an ISA.</span></p>
<p class="p1"><span class="s1">Those advantages stack up. </span></p>
<p class="p1"><span class="s1">ISAs are superior to SIPPs when access to your money before the normal minimum pension age is your top priority. </span></p>
<p class="p3"><span class="s1">However, the various pension tax breaks on offer combine to make SIPPs the best option for the bulk of most people’s retirement savings. </span></p>
<p class="p3"><span class="s1">LISAs are a different kettle of tax wrapper. Their dream combination of tax relief and tax-free withdrawals make LISAs an attractive option for <strong>basic-rate taxpayers</strong> vs pensions – <i>under some circumstances</i>. </span></p>
<p class="p3"><span class="s1">The devil is in the detail and we’ll dance with him shortly. Before that, let’s talk tax-strategy diversification.</span></p>
<h2 class="p5"><span class="s1">Tax-strategy diversification in retirement planning</span></h2>
<p class="p1"><span class="s1">Tax-strategy diversification for UK investors means spreading your retirement savings between your LISA, ISA, and SIPP accounts. It’s a defence against adverse changes to the tax system in the future. </span></p>
<p class="p1"><span class="s1">The concept is analysed in a US research paper called<em> <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2799288" target="_blank" rel="noopener"><span class="s2">Tax Uncertainty and Retirement Savings Diversification</span></a> </em>by Brown<em> et al</em>.</span></p>
<p class="p1"><span class="s1">The paper examines the impact of tax code changes upon the traditional IRA and the Roth IRA. These two American tax shelters are analogues of our SIPP and ISA, respectively. </span></p>
<p class="p1"><span class="s1">The authors make several key observations.</span><span class="s1"> I’ve translated their US tax-shelter language directly into their UK equivalents, as follows…<br /></span></p>
<p class="p1"><span class="s1"><strong>SIPPs</strong> are negatively affected by income tax hikes in the future. They are positively affected by income tax falls. </span></p>
<p class="p1"><span class="s1">For example, if you get tax relief at 20% now but are later taxed on retirement withdrawals at 22% then that’s a blow against pensions. </span></p>
<p class="p1"><span class="s1">The reverse is true for <strong>ISAs</strong>. They’re taxed upfront and so enable you to lock in your income tax rate now. This is an advantage for ISAs vs SIPPs if tax rates rise in your retirement. </span></p>
<p class="p1"><span class="s1">For example, you win if you took a 20% tax hit on the salary that funds your ISA contributions today but then the basic rate of tax rises above 20% by the time you come to withdraw tax-free in the future. </span></p>
<p class="p1"><span class="s1">Meanwhile SIPPs offer a hedge against poor pension performance. If your investments are hit by a terrible <a href="https://monevator.com/sequence-of-returns-risk/" target="_blank" rel="noopener">sequence of returns</a> then more of your withdrawals will probably be taxed at a lower tax bracket. This offsets some of the damage wreaked by bad luck, especially if you banked higher-rate tax reliefs when you were working. </span></p>
<h3 class="p3"><span class="s1">The long game</span></h3>
<p class="p1"><span class="s1">The whole research paper is worth a read. But the following quotes provide particular insight on how future tax changes could boost or hobble SIPPs and ISAs for different demographics.</span></p>
<blockquote>
<p class="p1"><span class="s1">Future tax rates are more uncertain over longer retirement horizons. Our analysis of historical tax changes also suggests that the rates associated with higher incomes are more variable.</span></p>
</blockquote>
<p class="p1"><span class="s1">The paper’s authors found that income tax rates were much more volatile for high earners going back to 1913…</span></p>
<blockquote>
<p class="p1"><span class="s1">…as a result, the </span><span class="s2">highest tax-risk exposures will occur among younger investors with sufficient traditional account<em> [such as SIPP]</em> savings to produce taxable income in retirement that exhausts the lower-income brackets</span><span class="s1">. Young, high-income investors who are likely to meet these criteria can manage their exposure to tax-schedule uncertainty by investing a portion of their wealth in Roth <em>[for us, ISA]</em> accounts.</span></p>
</blockquote>
<blockquote>
<p class="p1"><span class="s1">High-income investors increase their allocations to Roth<em> [ISA]</em> accounts when faced with </span><span class="s1">uncertainty about future tax rates. At these income levels, reducing consumption risk in retirement by locking in tax rates today is more valuable than realizing a potentially lower tax bracket in the future.</span></p>
</blockquote>
<p><span class="s1">(Our pointers are in <em>italics</em>).</span></p>
<p class="p1"><span class="s1">Young, higher-earners are the most susceptible to steep future tax rises, according to this analysis. Tax-strategy diversification implies that they should hedge against that possible fate by ploughing a significant portion of today’s income into ISAs. T</span><span class="s1">he danger with SIPPs is that <strong>future withdrawals may be made at tax rates that are higher</strong> than the reliefs on offer today. </span></p>
<p class="p1"><span class="s1">I’d caution, though, that the biggest SIPP vs ISA gains come from taking higher rates of tax relief on pensions that are subsequently taxed at a retiree’s much lower income tax rate. </span><span class="s1">UK income taxes would have to rocket in the future to negate this advantage. </span></p>
<p><span class="s1">On the other hand, here’s a reason to invest in pensions that most of us would rather not think about: </span></p>
<blockquote>
<p class="p1"><span class="s1">Investors with sufficiently high current income must pay the top tax rate in the current period, </span><span class="s1">however, such that </span><span class="s2">the traditional <em>[SIPP]</em> account is preferable for higher-income investors who may end up in a lower tax bracket if the stock market performs poorly</span><span class="s1">.</span></p>
</blockquote>
<p>Eek. Well, bad things can <a href="https://monevator.com/the-uks-worst-stock-market-crash-1972-1974/" target="_blank" rel="noopener">happen</a>.</p>
<h3>The case for a bit of both</h3>
<p class="p1">Ultimately the paper comes to a conclusion that <span class="s1">I suspect many investors reach using their gut:</span></p>
<blockquote>
<p class="p1"><span class="s1">The optimal asset location policy for most households involves diversifying between traditional <em>[SIPP]</em> and Roth<em> [ISA]</em> vehicles.</span></p>
</blockquote>
<p class="p1"><span class="s1">Spreading your bets makes sense (<a href="https://monevator.com/assume-every-investment-can-fail-you/" target="_blank" rel="noopener">as ever</a>), especially when retirement is a dim and distant prospect. </span></p>
<p class="p1"><span class="s1">But that said, do bear in mind this is a US-focused study. T</span><span class="s1">heir income tax bands are more incremental than ours.</span></p>
<p class="p1"><span class="s1">In contrast, our SIPPs benefit from a massive cliff-edge if you enjoy higher-rate tax relief when you pay in but your retirement income falls mostly in the 0-20% band. </span></p>
<p class="p1"><span class="s1">This feature of the UK tax system tilts the playing field heavily in favour of pensions vs ISAs, as we’ll see. </span></p>
<p>(Note: I’ve used UK income tax rates throughout the article. The maths does change a little for Scottish taxpayers. While the broad conclusions are the same, the pecking order may change at the margins.)</p>
<h2 class="wp-block-heading">ISA vs SIPP: when it doesn’t matter</h2>
<p>You’re taxed upfront on money that goes into your ISA, but your withdrawals are tax-free. </p>
<p>SIPPs work the other way around. You pay less tax on contributions, but are subject to tax on money taken out. Thus UK pension vehicles can be thought of as tax-deferred accounts. </p>
<p>ISAs vs SIPPs is a <a href="https://monevator.com/pensions-versus-isas/" target="_blank" rel="noreferrer noopener">dead heat</a> when the tax deducted from your ISA contributions <strong>matches</strong> the tax you pay on pension withdrawals. </p>
<p>The amount of cash you can take out of each account is <strong>exactly the same</strong> in this situation, as shown in the following example:</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Account</td>
<td class="Tab_Rowhead">Gross income</td>
<td class="Tab_Rowhead">Net after tax</td>
<td class="Tab_Rowhead">After tax relief</td>
<td class="Tab_Rowhead">Withdrawal</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral">£100</td>
<td class="Tab_ColGeneral">£80</td>
<td class="Tab_ColGeneral">£80</td>
<td class="Tab_ColGeneral">£80</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral">£100</td>
<td class="Tab_ColGeneral">£80</td>
<td class="Tab_ColGeneral">£100</td>
<td class="Tab_ColGeneral">£80</td>
</tr>
</tbody>
</table>
<p class="p1"><span class="s1">The example tracks the value of £100 through the tax shelter journey, from contribution to withdrawal.</span></p>
<p class="p1"><span class="s1">Think of it as comparing each £100 that you could choose to put in either your ISA or SIPP. </span></p>
<ul class="ul1">
<li class="li1"><i></i><span class="s1"><i>Gross income</i> is earned before tax. </span></li>
<li class="li1"><i></i><span class="s1"><i>Net after tax</i> is the amount left in your account after HMRC takes its bite. </span></li>
<li class="li1"><i></i><span class="s1"><i>After tax</i> <em>relief</em> is the value of your savings after any rebates. </span></li>
<li class="li1"><i></i><span class="s1"><i>Withdrawal</i> is what’s left of your original £100 once taken in retirement (based on current tax rates and ignoring investment returns because they’re ISA vs SIPP neutral). </span></li>
</ul>
<p class="p1"><span class="s1">A previous post of ours walks you through the underlying SIPP vs ISA <a href="https://monevator.com/how-pensions-will-help-you-reach-financial-independence-quicker-than-isas-alone/" target="_blank" rel="noopener"><span class="s2">maths</span></a>. </span></p>
<p class="p1"><span class="s1">But just to be clear, pensions always win when an employer contribution match is on the table.</span></p>
<p class="p1"><span class="s1">Pound-for-pound an employer match doubles your money. Not taking the match is like volunteering for a pay cut. </span></p>
<h3>Same difference</h3>
<p class="p1"><span class="s1">Employer contributions notwithstanding, the example above shows that the tax-saving powers of an ISA or a SIPP are evenly matched when:</span></p>
<ul class="ul1">
<li class="li1"><span class="s1">You’re taxed at 20% on the ISA cash you put in, and<br /></span></li>
<li class="li1"><span class="s1">You’re taxed at 20% on the SIPP cash you withdraw</span></li>
</ul>
<p class="p3"><span class="s3">The amount of income you can take from each vehicle is the same, if the tax rates are equal. </span><span class="s3">The order of tax and tax relief makes no difference to your investment returns, as <em>The Investor</em> has <a href="https://monevator.com/pensions-versus-isas/" target="_blank" rel="noopener"><span class="s2">previously shown</span></a>. </span></p>
<p class="p3"><span class="s3">If both accounts gain, for example, 5% a year, then your SIPP’s balance will be larger than your ISA’s because there’s a bigger sum of money to grow after tax relief. </span></p>
<p class="p3"><span class="s3">But the SIPP’s advantage is cancelled out by tax on withdrawal. Hence the <i>Withdrawal </i>value is identical for both accounts in this scenario. </span></p>
<p class="p4"><span class="s1">If that’s the case for you then we need to head into an ISAs vs SIPPs tie-breaker situation.</span></p>
<h2 class="wp-block-heading">ISAs vs SIPPs: tie-breaker situation</h2>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Priority</td>
<td class="Tab_Rowhead">ISA</td>
<td class="Tab_Rowhead">SIPP</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Access before pension age</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">No</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Inheritance tax benefit</td>
<td class="Tab_ColGeneral">Spouse</td>
<td class="Tab_ColGeneral">Spouse<a href="#footnote_1_27384" id="identifier_1_27384" class="footnote-link footnote-identifier-link" title="Anyone until April 2027.">2</a></td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Means-testing / bankruptcy advantage</td>
<td class="Tab_ColGeneral">No</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Tax-strategy diversification </td>
<td class="Tab_ColGeneral">Use</td>
<td class="Tab_ColGeneral">both</td>
</tr>
</tbody>
</table>
<p>Personally, if I was many years from retirement I’d favour the accessibility of ISAs as a handy backstop. Just in case life took an unpleasant turn. </p>
<p>However the wisdom of tax-strategy diversification still suggests splitting your savings between both vehicles. </p>
<h2 class="p1"><span class="s1">SIPPs vs ISAs: back in the real world</span></h2>
<p class="p3"><span class="s2">Because most people will be taxed at a lower rate of tax as retirees than they are as worker bees<a href="#footnote_2_27384" id="identifier_2_27384" class="footnote-link footnote-identifier-link" title="As the rules stand.">3</a>, in practice pensions usually beat ISAs for retirement purposes.<br /></span></p>
<p class="p3"><span class="s2">Albeit LISAs are the wild card that can disrupt the SIPP vs ISA hierarchy. </span></p>
<p class="p3"><span class="s2">Much depends on:</span></p>
<ul>
<li class="p3"><span class="s2">How much 0% taxed cash<a href="#footnote_3_27384" id="identifier_3_27384" class="footnote-link footnote-identifier-link" title="That includes the Personal Allowance and any 25% tax-free cash.">4</a> your SIPP ultimately provides as a percentage of your retirement income. </span></li>
<li class="p3"><span class="s2">Whether your SIPP income is taxed at a lower bracket in retirement relative to the tax relief you snaffled while working. </span></li>
</ul>
<p class="p3"><span class="s2">To unpick the complexity, I’ll try to find the best-fit tax shelters for most people by running through some common retirement income scenarios.</span></p>
<p class="p3"><span class="s2">I’ll account for variations in individual circumstances by looking at key breakpoints that alter the ISA vs SIPP rankings. </span></p>
<h3 class="p1"><span class="s1">Breakpoint 1: the tax shelter types available</span></h3>
<p class="p3"><span class="s2">I tested the <a href="https://monevator.com/tax-efficient-investing-uk-order-isa-sipp/" target="_blank" rel="noopener"><span class="s3">tax efficiency</span></a> of four kinds of accounts that are useful for retirement savings:</span></p>
<p style="padding-left: 40px;"><span class="s2"><strong>Salary-sacrifice SIPP</strong> – this wrapper enables basic-rate employees to legitimately avoid 28% tax (20% + 8% NICs) while higher-rate employees avoid 42% tax (40% + 2% NICs)</span></p>
<p style="padding-left: 40px;"><span class="s2"><strong>SIPP</strong> – a standard pension account provides tax relief at the 20%, 40%, and 45% rates but you still pay national insurance contributions (NICs)</span></p>
<p style="padding-left: 40px;"><strong><span class="s5"><a href="https://monevator.com/dont-wait-to-open-your-stocks-and-shares-isa/" target="_blank" rel="noopener"><span class="s6">Stocks and shares ISAs</span></a></span></strong><span class="s2"> – can deliver the investment growth needed for retirement. </span></p>
<p style="padding-left: 40px;">As can <strong>LISAs </strong>– they also accept investments. </p>
<h3 class="p1"><span class="s1">Breakpoint 2: retirement income levels and stealth taxes</span></h3>
<p class="p3"><span class="s2">I’ve examined three <b>retirement income levels</b> that align with the research published in the <em><a href="https://www.retirementlivingstandards.org.uk/" target="_blank" rel="noopener"><span class="s3">Retirement Living Standards</span></a> </em>report. </span></p>
<p class="p3"><span class="s2">These three tiers equate to a Minimum, Moderate, and Comfortable living standard in retirement. </span></p>
<p class="p3"><span class="s2">However, I’ve adjusted the incomes to account for our current era of <b>stealth taxes</b>. </span></p>
<p class="p3"><span class="s2">The UK’s tax thresholds are frozen until April 2028. That is a tax hike by any other name. </span></p>
<p class="p4"><span class="s1">The Office for Budget Responsibility estimates this <a href="https://obr.uk/box/the-impact-of-frozen-or-reduced-personal-tax-thresholds/" target="_blank" rel="noopener"><span class="s7">manoeuvre</span></a> amounts to increasing the basic rate of income tax from 20% to 24%. </span></p>
<p class="p4"><span class="s1">Rising tax rates disadvantage pensions vs ISAs as noted earlier. So I’ve inflated the three retirement income levels by 2024-25 annual CPIH plus 3% assumed inflation for every year until 2028. T</span><span class="s1">his increased income requirement models SIPP withdrawals losing more to tax, as inflation erodes the lower brackets. </span></p>
<p class="p4"><span class="s1">I assume that the tax thresholds rise with inflation after April 2028, as they should. </span></p>
<h3 class="p1"><span class="s1">Breakpoint 3: how you use your personal allowance</span></h3>
<p class="p4"><span class="s1">The less your SIPP income is taxed in retirement, the better SIPPs do versus ISAs. </span></p>
<p class="p4"><span class="s1">If you retire at age 55 and don’t receive a State Pension until age 67 then your SIPP’s tax performance improves – especially at lower retirement incomes – because a significant chunk falls into your <b>personal allowance.</b> </span></p>
<p class="p4"><span class="s1">But the SIPP advantage contracts if your personal allowance is mopped up by the State Pension, defined benefit pensions, or by any other income. </span></p>
<p class="p4"><span class="s1">Indeed, with the personal allowance frozen and the <a href="https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-triple-lock-pension-and-how-does-it-affect-me" target="_blank" rel="noopener"><span class="s7">Triple Lock</span></a> intact, the full State Pension could grow large enough to entirely fill the 0% income tax band by April 2028, or soon thereafter. </span></p>
<p class="p4"><span class="s1">I’ve used that assumption in the examples below to guide anyone who thinks they’ll retire at State Pension age, or with a substantial source of alternative income. </span></p>
<p class="p4"><span class="s1">Even if you retire early, the State Pension will arrive around ten years after your normal minimum pension age, from April 2028.</span></p>
<p class="p4"><span class="s1">I account for this by modelling a 40-year retirement journey. This sees SIPP income cease to benefit from the personal allowance after the first decade. </span></p>
<h3 class="p1"><span class="s1">Breakpoint 4: the fate of 25% tax-free cash</span></h3>
<p class="p4"><span class="s1">UK pensions are boosted by another blessed benefit. That’s the <b>25% tax-free cash</b> that can be taken as a lump sum (known as the PCLS) or in ongoing slices as part of phased <a href="https://monevator.com/pension-drawdown-rules/" target="_blank" rel="noopener">drawdown</a>. </span></p>
<p class="p4"><span class="s1">Before the Lifetime Allowance <a href="https://monevator.com/weekend-reading-can-you-bank-on-it/" target="_blank" rel="noopener">was abolished</a>, the tax-free </span><span class="s1">sum used to automatically reduce a basic-rate payers overall income tax burden from 20% to 15%. </span></p>
<p class="p4"><span class="s1">But that can no longer be taken for granted – because the 25% tax-free cash allowance is now capped at £268,275. </span></p>
<p class="p4"><span class="s1">It sounds a lot as of today, but the Chancellor has said the limit is frozen. </span></p>
<ul>
<li class="p4"><span class="s1">Frozen until April 2028 – after which it rises with inflation?</span></li>
</ul>
<ul>
<li class="p4"><span class="s1">Frozen forever? In which case inflation will eventually swallow it like light quaffed by a black hole. </span></li>
</ul>
<p class="p4"><span class="s1">It’s not clear, so I’ve tested both scenarios. </span></p>
<p class="p4"><span class="s1">The first scenario is relevant to near-term retirees who can assume their tax-free cash allowance will retain most of its current value when they retire. Especially if they’re at the Minimal to Moderate income levels and inflation is tamed again (which helps if the cap doesn’t rise in future years). </span></p>
<p class="p4"><span class="s1">The second scenario may make sense if you’re three or four decades from retirement, and the cap remains frozen in time while inflation crushes it. </span></p>
<p class="p5"><span class="s1">Right, let’s get on with our key ISA vs SIPP case studies!</span></p>
<h2 class="wp-block-heading">SIPPs vs ISAs: £15,842 Minimum annual retirement income</h2>
<p>In this example, SIPP contributions are made at the basic income tax rate and the 25% tax-free cash cap is not reached during a 40-year retirement.</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA<a href="#footnote_4_27384" id="identifier_4_27384" class="footnote-link footnote-identifier-link" title="Personal Allowance">5</a> intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA / SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">–</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
</tbody>
</table>
<ul class="wp-block-list">
<li>PA intact = SIPP income benefits from the 0% personal allowance (PA)</li>
<li>Retire on State Pension = SIPP income does not benefit from the personal allowance</li>
<li>40-yr retirement = The ranking for a 40-year retirement journey where the personal allowance is available to your SIPP for the first decade, while the State Pension absorbs the PA thereafter. 25% tax-free cash may run out at some stage. (Though not at the Minimum income level) </li>
</ul>
<p>The headline is that a LISA wins across a 40-year retirement journey. The salary sacrifice pension used to win this category when we’ve previously run the numbers. But the reduction in National Insurance Contributions means that the LISA edges the contest now.</p>
<p>You can’t access a LISA until age 60 though, whereas it’s <a href="https://monevator.com/minimum-pension-age-increase/" target="_blank" rel="noreferrer noopener">age 57</a> for most SIPP-owners from April 2028.</p>
<p>The LISA also now beats a salary sacrifice SIPP if you retire later with a full State Pension at age 67 (and/or a decent defined benefit pension et cetera). </p>
<p>A normal SIPP (‘relief at source’ or ‘net pay’, no salary sacrifice option) lags behind a LISA overall. Standard ISAs come last. </p>
<p>Despite this outcome, remember any pension is immediately catapulted above a LISA when your employer matches your contributions. </p>
<p>After you’ve trousered your employer’s contributions, you’re best off stuffing your LISA up to its £4,000 annual hilt <strong>on tax-strategy diversification grounds</strong>. </p>
<p>LISA contributions locked in at today’s tax rates will benefit versus pensions if taxes go up in the future (which they are doing until April 2028 at least, due to that infernal fiscal drag).</p>
<h4 class="wp-block-heading">Basic-ally no difference</h4>
<p>Intriguingly, a normal SIPP isn’t that far ahead of an ISA if you retire at State Pension age in this basic-rate taxpayer scenario. </p>
<p>You pocket £77 from a SIPP, and £72 from an ISA, for every £100 you originally contributed to each account. That’s a 7% difference.</p>
<p>Such a slim margin suggests that diversifying between the two accounts is a sound idea. Albeit I’d still heavily favour my SIPP, given that small gains make all the difference at lower incomes. </p>
<h3 class="wp-block-heading">If the 25% tax-free cash is eliminated</h3>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA / SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">–</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
</tbody>
</table>
<p>This scenario downgrades pensions, which means a LISA should take priority before you load up your pension. </p>
<p class="p1"><span class="s1">For those retiring at the State Pension age, an ISA strategy even draws level with a non-salary sacrifice SIPP in terms of withdrawal value: £72 a piece for every £100 contributed. </span></p>
<p class="p1"><span class="s1">If I really believed that the 25% tax-free cash benefit was set to whither to nothing then I’d overwhelmingly favour my ISAs vs SIPPs in this scenario. </span></p>
<p class="p1"><span class="s1">However I think it’s more realistic to assume that the 25% tax break will retain some residual value, even if you’re 30-40 years away from retiring. </span></p>
<h3 class="wp-block-heading">SIPP contributions made at higher-rate taxpayer level</h3>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
</tbody>
</table>
<p class="p1"><span class="s1">Higher-rate taxpayer contributions lead to a decisive win for pensions in the SIPPs vs ISAs match-up. </span></p>
<p class="p1"><span class="s1">LISAs and ISAs form the bottom half of the table in this scenario and stay there. </span></p>
<p class="p1"><span class="s1">Salary sacrifice and normal SIPPs continue to beat the L/ISA gang whether you retire at the Minimum, Moderate, or Comfortable income level. </span></p>
<p>However, if you expect tax-free cash to be disappeared by government chicanery then the LISA draws level with the SIPP at the £47,000 retirement income mark. </p>
<p>At £56,000 LISAs draw level with the salary sacrifice pension and are the best choice for investors who expect to rock a £61,000 retirement income.</p>
<p>Essentially, exposure to greater levels of higher-rate tax, and the loss of tax-free cash, knock the gloss of the SIPP relative to the LISA’s tax-free withdrawals. </p>
<p>LISAs also tie with salary sacrifice SIPPs at the £86,000 retirement income level even when you do have tax-free cash. That’s because you hit the lifetime tax-free cash cap so quickly. </p>
<p class="p1">But again, none of this undoes the primacy of pensions pumped up by employer contributions. </p>
<p class="p1"><span class="s1">For those of us operating below such Olympian heights, the higher-rate tax reliefs are the sweet spot for pension contributions – because 40%-tax workers are likely to become 20%-tax retirees. </span></p>
<h2 class="wp-block-heading">SIPPs vs ISAs: £34,435 Moderate annual retirement income</h2>
<p>LISA is the way to go again if you’re making contributions at the basic income tax rate:</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
</tbody>
</table>
<p>Salary sacrifice’s lead over a LISA (in the left-hand column) is slight, even when you’re able to protect some withdrawals via your 0% tax personal allowance. </p>
<p>The principle of tax-strategy diversification suggests you’d do well to fill the LISA first. </p>
<p class="p1"><span class="s1">Salary sacrifice outcomes continue to dominate normal SIPPs. That’s because they effectively gain relief on 32% tax, instead of 20%. </span></p>
<p class="p1"><span class="s1">Meanwhile normal SIPPs enable you to withdraw 7% more than ISAs across a 40-year retirement, or if you retire at State Pension age.</span></p>
<h3>If the 25% tax-free cash is eliminated</h3>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA / SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">–</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
</tbody>
</table>
<p class="p1"><span class="s1">The ISA / SIPP draw occurs because the SIPP’s 20% tax relief on contributions is the same as the ISA’s 20% tax exemption on withdrawals.</span></p>
<p class="p1"><span class="s1">The SIPP vs ISA rankings for <strong>higher-rate taxpayer contributions</strong> are the same as the Minimum income level, regardless of what happens to the 25% tax-free cash. Prioritise pensions first, then LISAs, and ISAs come last. </span></p>
<h2 class="wp-block-heading">SIPPs vs ISAs: £47,417 Comfortable annual retirement income</h2>
<p>SIPP contributions are made at the basic income tax rate in this scenario. The 25% tax-free cash cap is reached after 23 years of retirement.</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA / Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">–</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
</tbody>
</table>
<p>LISAs have reeled in salary sacrifice SIPPs across the board at the Comfortable income level. </p>
<p class="p1"><span class="s1">Meanwhile, SIPPs only just beat ISAs across a 40-year retirement </span><span class="s1">because the tax-free cash spigot splutters dry after 24 years. </span></p>
<p class="p1"><span class="s1">However, it’s possible to avoid this fate by <strong>pulling out your 25% tax-free cash as a lump sum</strong> (PCLS) before the ceiling is reached.</span></p>
<p class="p1"><span class="s1">Ideally, you’d get it all under ISA cover as quickly as possible. Once in an ISA your money can continue to grow tax-free without limit. (That is, as if the tax-free cash cap had not been introduced.)</span></p>
<p class="p1"><span class="s1">How doable is that? </span></p>
<h3>Sheltering your tax-free lump sum</h3>
<p class="p1"><span class="s1">Let’s say you retire in late March and deliberately leave that year’s ISA allowance free until then. That’s £20,000 under your tax shield straightaway. </span></p>
<p class="p1"><span class="s1">The tax year clock ticks on to April 6. Now you’ve got another £20,000 worth of ISA to fill with newly-minted 25% tax-free cash. </span></p>
<p class="p1"><span class="s1">Perhaps you also have some <a href="https://monevator.com/its-an-emergency-fund/" target="_blank" rel="noopener">emergency cash</a> standing by, an offset mortgage facility, or other cash savings?</span></p>
<p class="p1"><span class="s1">With a bit of planning, you can use these resources to expand your flexible ISA’s elastic band in the years before your retirement date. </span></p>
<p class="p1"><span class="s1">Check out the <em>‘Flexible ISA hack to build your tax-free ISA allowance’</em> section in our <a href="https://monevator.com/annual-isa-allowance/" target="_blank" rel="noopener"><span class="s2">ISA allowance</span></a> post. (Hat tip to <a href="https://monevator.com/tag/finumus/" target="_blank" rel="noopener"><span class="s2"><em>Finumus</em></span></a> who came up with the idea.)</span></p>
<p class="p1"><span class="s1">Double your ISA allowance numbers if you have a trustworthy significant other. </span></p>
<p class="p1"><span class="s1">You’ll be able to stash a bit more tax-free in General Investment Accounts, too. However, the much-shrunk <a href="https://monevator.com/how-uk-dividends-are-taxed" target="_blank" rel="noopener">dividend tax</a> and <a href="https://monevator.com/weekend-reading-prices-versus-values/" target="_blank" rel="noopener">Capital Gains Tax</a> allowances mean that only a smidge of your subsequent returns will escape HMRC’s tractor beam. </span></p>
<p class="p1"><span class="s1">All the same, you’re better off being taxed at dividend and capital gains rates than income tax rates. Hence you should withdraw any 25% tax-free cash as soon you can, once you look like you’ll hit the cap. It’s better out than in. </span></p>
<h3>If the 25% tax-free cash is eliminated</h3>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Ranking</td>
<td class="Tab_Rowhead" style="text-align: left;">PA intact</td>
<td class="Tab_Rowhead" style="text-align: left;">Retire on State Pension</td>
<td class="Tab_Rowhead" style="text-align: left;">40-yr retirement</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">1.</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">LISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">2.</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
<td class="Tab_ColGeneral" style="text-align: left;">Salary sacrifice</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">3.</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA </td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">4.</td>
<td class="Tab_ColGeneral" style="text-align: left;">ISA</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
<td class="Tab_ColGeneral" style="text-align: left;">SIPP</td>
</tr>
</tbody>
</table>
<p class="p1"><span class="s1">Notice that a SIPP actually performs worse than an ISA in the main two scenarios. That’s because a ‘Comfortable’ income earner ends up being partially taxed at the higher-rate, once you add on their State Pension. </span></p>
<p class="p1"><span class="s1">This scenario could unfold for a basic-rate worker who saved into their SIPP from a young age, experienced outstanding investment performance, or suffered elevated tax rates in retirement. </span></p>
<p>Aside from that, frozen tax thresholds and the pernicious effects of fiscal drag make it increasingly likely that retirees will be dragged into the 40% band. </p>
<p class="p1"><span class="s1">The SIPP vs ISA rankings for <b>higher-rate taxpayer contributions</b> differ slightly from the Minimum income level. </span></p>
<p class="p1"><span class="s1">The ranking is: Salary sacrifice SIPP, non-salary sacrifice SIPP, LISA, then finally ISA.</span></p>
<p>Except… that LISAs and <span class="s1">non-salary sacrifice SIPPs are tied if you retire at the State Pension age. </span></p>
<h2 class="wp-block-heading">LISAs vs SIPPs: tie-breaker situation</h2>
<p>There are quite a few scenarios that end in a draw between LISAs and pensions. Let’s head into the tie-breaker:</p>
<table class="Mon_Table" border="0" width="540">
<tbody>
<tr class="Tab_Rowhead">
<td class="Tab_Rowhead" style="text-align: left;">Priority</td>
<td class="Tab_Rowhead">LISA</td>
<td class="Tab_Rowhead">SIPP</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Access before age 60</td>
<td class="Tab_ColGeneral">No</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Can help to buy a house</td>
<td class="Tab_ColGeneral">Yes</td>
<td class="Tab_ColGeneral">No</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Inheritance tax benefit</td>
<td class="Tab_ColGeneral">Spouse</td>
<td class="Tab_ColGeneral">Spouse<a href="#footnote_5_27384" id="identifier_5_27384" class="footnote-link footnote-identifier-link" title="Anyone until April 2027.">6</a></td>
</tr>
<tr class="Tab_RowOdd">
<td class="Tab_ColGeneral" style="text-align: left;">Means-testing / bankruptcy advantage</td>
<td class="Tab_ColGeneral">No</td>
<td class="Tab_ColGeneral">Yes</td>
</tr>
<tr class="Tab_RowGeneral">
<td class="Tab_ColGeneral" style="text-align: left;">Tax-strategy diversification</td>
<td class="Tab_ColGeneral">Use</td>
<td class="Tab_ColGeneral">both</td>
</tr>
</tbody>
</table>
<p class="p1"><span class="s1">I don’t think the few years’ gap in account accessibility is an issue. You can always drawdown harder on pensions until age 60. </span></p>
<p class="p1"><span class="s1">Interestingly, the government seems to have <a href="https://adviser.royallondon.com/technical-central/pensions/benefit-options/increase-in-normal-minimum-pension-age-in-2028/" target="_blank" rel="noopener"><span class="s2">cooled its jets</span></a> on advancing the normal minimum retirement age in lockstep with the State Pension age. </span></p>
<p class="p1"><span class="s1">Accessibility aside, the LISA’s low allowance, restrictions on contributions beyond age 50, plus the principle of tax-strategy diversification all suggest maxing out the LISA if/while you can. </span></p>
<p class="p1"><span class="s1">That goes double if your financial position means that <a href="https://monevator.com/salary-sacrifice/" target="_blank" rel="noopener"><span class="s3">salary sacrifice</span></a> actually makes you worse off. Hit that link for the gory details. </span></p>
<h2 class="p3"><span class="s1">Pensioned off</span></h2>
<p class="p1"><span class="s1">There have probably been retirements that lasted less time than it took to write this post. Alas recent developments have not made the SIPP vs ISA question any easier to answer, I’m sorry to say. </span></p>
<p class="p1"><span class="s1">But I hope this guide helps you think through the options. Assuming you haven’t lost the will to live in the meantime. </span></p>
<p class="p1"><span class="s1">Do I need to plug taking your employer pension contributions one more time? Probably not…</span></p>
<p class="p1"><span class="s1">Take it steady,</span></p>
<p class="p1"><span class="s1"><i>The Accumulator</i></span></p>
<p><em>P.S. Here’s more on <a href="https://monevator.com/how-much-should-i-put-in-my-pension/" target="_blank" rel="noopener">how much should you should put in a pension</a> and <a href="https://monevator.com/how-much-do-i-need-to-retire/" target="_blank" rel="noopener">how much you need to retire</a>. </em></p>
<p><em>P.P.S. We’ve updated this post as noted to reflect the latest output of our fearsome spreadsheets given today’s realities. Many comments below will refer to the earlier iteration of the post, so please have a care when perusing.</em></p><ol class="footnotes"><li id="footnote_0_27384" class="footnote">The Normal Minimum Pension Age will be 57 for most people from 5 April 2028. [<a href="#identifier_0_27384" class="footnote-link footnote-back-link">↩</a>]</li><li id="footnote_1_27384" class="footnote">Anyone until April 2027. [<a href="#identifier_1_27384" class="footnote-link footnote-back-link">↩</a>]</li><li id="footnote_2_27384" class="footnote">As the rules stand. [<a href="#identifier_2_27384" class="footnote-link footnote-back-link">↩</a>]</li><li id="footnote_3_27384" class="footnote">That includes the Personal Allowance and any 25% tax-free cash. [<a href="#identifier_3_27384" class="footnote-link footnote-back-link">↩</a>]</li><li id="footnote_4_27384" class="footnote">Personal Allowance [<a href="#identifier_4_27384" class="footnote-link footnote-back-link">↩</a>]</li><li id="footnote_5_27384" class="footnote">Anyone until April 2027. [<a href="#identifier_5_27384" class="footnote-link footnote-back-link">↩</a>]</li></ol>
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<p>Calculators at the ready! We tackle the thorny old problem of SIPPs vs ISAs…</p>
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<p><em>The Investor is unwell, I mean on holiday. Definitely not too drunk to write his column this week. Nuh-uh. No way, Jose. Nope. </em></p>
<p>Hi! <em>The Accumulator</em> here. Just covering while my good friend <em>The Investor</em> is having a nice rest.</p>
<p>OK, links is it? I’ve got loads. Because we’ve been planning this for weeks. Sure have.</p>
<p>Anyway, one article that sobered me up this week is a <a href="https://www.advisorperspectives.com/articles/2025/05/19/401-k-every-pot-glidepath-nowhere" target="_blank" rel="noopener">penetrating critique</a> of defined contribution (DC) pensions written by the esteemed William Bernstein and Edward McQuarrie.</p>
<p>They elegantly show that most people relying on DC pensions to provide for a successful retirement need:</p>
<ul>
<li>Much higher savings rates than is commonly admitted</li>
<li>100% stock portfolios throughout their entire investing lives (accumulation and decumulation combined)</li>
<li>A dose of luck: in the form of a benign sequence of returns and average historical return rates (Woe to thee if you’re below average.)</li>
</ul>
<p>The savings rates required to retire on a portfolio of low-risk assets (e.g. index-linked government bonds) are just not doable for most people. From the article:</p>
<blockquote><p>Grim indeed: using historical data, our analysis shows that not until the savings rate approaches 25% does the saver have more than a 50/50 chance of success, and to approach certainty requires savings rates in the 40% range. Lower savings rates require a market return that has seldom been on offer.</p></blockquote>
<p>To bring savings rates down to something half manageable, it’s 100% equities all the way:</p>
<blockquote><p>It turns out, counterintuitively, that only one maneuver improves the success rate, and that’s a 100% stock portfolio both during accumulation and retirement.</p></blockquote>
<p>Even then you need a 20% savings rate to push down your chance of retirement ruin to 4%.</p>
<p>How likely is it that the majority can achieve that? We’ve known for a long time that the median UK pension pot is ridiculously underfunded. And those who struggle to save likely face bleak retirements, or a working life that stretches far into old age.</p>
<p>Bernstein and McQuarrie’s prescription:</p>
<blockquote><p>The current system doesn’t need more nudges; it needs dynamite and rebuilding from the ground up on the DB [defined benefit] model.</p></blockquote>
<p>That isn’t going to happen here. Nor in the States. Indeed, the authors’ aim seems to be to push back against libertarian forces who seek to dismantle all forms of social insurance, and leave individuals at the mercy of the market.</p>
<p>Whatever you think of the politics, the underlying <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5267778" target="_blank" rel="noopener">research paper</a> by Bernstein and McQuarrie is a clear-eyed education in investing risk. Most of all, it relentlessly strips away the many myths that comfort us when we look at a global equities returns chart and notice that it’s done pretty well for fifty years.</p>
<p>Have a great weekend.</p>
<p><!--more--></p>
<h3>From Monevator</h3>
<p>FIRE-side chat: after the rollercoaster – <a href="https://monevator.com/fire-side-chat-after-the-rollercoaster/" target="_blank" rel="noopener">Monevator</a></p>
<p>SIPPs vs ISAs: battle of the tax shelters – <a href="https://monevator.com/sipps-vs-isas-best-pension-vehicle/" target="_blank" rel="noopener">Monevator</a></p>
<p>From the archive-ator: Bear market recovery times – <a href="https://monevator.com/bear-market-recovery/" target="_blank" rel="noopener">Monevator</a></p>
<h3>News</h3>
<p>Crypto ETN ban could be lifted for UK retail investors – <a href="https://www.which.co.uk/news/article/you-could-soon-be-able-to-buy-crypto-investment-funds-but-should-you-acShP8J6kO0w" target="_blank" rel="noopener">Which</a></p>
<p>Revenge tax menaces foreign holders of US assets – <a href="https://www.ft.com/content/96e9d529-32d0-424e-8024-d62235df0efd" target="_blank" rel="noopener">FT</a></p>
<p>Pension reforms ahoy. Just what we need! – <a href="https://www.thisismoney.co.uk/money/pensions/article-14783305/Pension-pots-savers-Reeves.html" target="_blank" rel="noopener">This Is Money</a></p>
<p>UK Tesla car sales down by a third: analysts stumped – <a href="https://www.theguardian.com/technology/2025/jun/05/uk-sales-of-new-tesla-cars-slumped-by-third-in-may-amid-elon-musk-backlash?CMP=Share_AndroidApp_Other" target="_blank" rel="noopener">Guardian</a></p>
<p>Another fintech snubs the London Stock Exchange – <a href="https://www.ft.com/content/9c8fed05-e0c3-407f-bce4-f471a6524c5a" target="_blank" rel="noopener">FT</a></p>
<p><a href="https://i0.wp.com/monevator.com/wp-content/uploads/2025/06/Tesla_Stock-large.jpg?ssl=1"><img data-recalc-dims="1" loading="lazy" decoding="async" class="alignnone size-full wp-image-92500" src="https://i0.wp.com/monevator.com/wp-content/uploads/2025/06/Tesla_Stock-large.jpg?resize=1168%2C600&ssl=1" alt="" width="1168" height="600" srcset="https://i0.wp.com/monevator.com/wp-content/uploads/2025/06/Tesla_Stock-large.jpg?w=1168&ssl=1 1168w, https://i0.wp.com/monevator.com/wp-content/uploads/2025/06/Tesla_Stock-large.jpg?resize=300%2C154&ssl=1 300w, https://i0.wp.com/monevator.com/wp-content/uploads/2025/06/Tesla_Stock-large.jpg?resize=1024%2C526&ssl=1 1024w, https://i0.wp.com/monevator.com/wp-content/uploads/2025/06/Tesla_Stock-large.jpg?resize=768%2C395&ssl=1 768w" sizes="(max-width: 1000px) 100vw, 1000px" /></a></p>
<p>Source: This Is Money</p>
<p>Tesla price plunge: a textbook case of idiosyncratic stock-risk – <a href="https://www.thisismoney.co.uk/money/markets/article-14786567/Tesla-shares-150bn-plunge-Musk-vs-Trump-erupts.html" target="_blank" rel="noopener">This Is Money</a></p>
<h3>Products and services</h3>
<p>Banking switch offers are hot right now – <a href="https://becleverwithyourcash.com/the-best-bank-switching-cashback-interest-offers/?_gl=1*1mz4d5h*_up*MQ..*_ga*MTkwNzY4OTk5LjE3NDkyMzI2MTE.*_ga_JTY5ER7WF3*czE3NDkyMzI2MTAkbzEkZzAkdDE3NDkyMzI2MTAkajYwJGwwJGgw*_ga_H5TGRS9T09*czE3NDkyMzI2MTAkbzEkZzAkdDE3NDkyMzI2MTAkajYwJGwwJGgw" target="_blank" rel="noopener">Be Clever With Your Cash</a></p>
<p>Best mortgage rates for first-time buyers – <a href="https://www.thisismoney.co.uk/money/mortgageshome/article-14764909/best-mortgage-rates-time-buyers.html" target="_blank" rel="noopener">This Is Money</a></p>
<p>Hack: How to ‘spend’ on your debit card without spending – <a href="https://becleverwithyourcash.com/bank-rewards-debit-card-spend-hack/?_gl=1*1qdpsly*_up*MQ..*_ga*MTkwNzY4OTk5LjE3NDkyMzI2MTE.*_ga_JTY5ER7WF3*czE3NDkyMzI2MTAkbzEkZzAkdDE3NDkyMzI2MTAkajYwJGwwJGgw*_ga_H5TGRS9T09*czE3NDkyMzI2MTAkbzEkZzAkdDE3NDkyMzI2MTAkajYwJGwwJGgw" target="_blank" rel="noopener">Be Clever With Your Cash</a></p>
<p>Avoid these travel insurance nightmares – <a href="https://www.which.co.uk/news/article/why-travel-insurance-goes-wrong-and-what-you-can-do-about-it-a0B564T9WhC5" target="_blank" rel="noopener">Which</a></p>
<p>UK property hotspots – <a href="https://www.thisismoney.co.uk/money/mortgageshome/article-14780659/Britains-booming-housing-markets-Rightmove-reveals-10-areas-sales-skyrocketed.html" target="_blank" rel="noopener">This Is Money</a></p>
<p>WASPI women: watch out for scam websites – <a href="https://www.theguardian.com/money/2025/apr/27/waspi-women-fake-scam-compensation-websites" target="_blank" rel="noopener">Guardian</a></p>
<p><p>Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through <a href="https://monevator.com/go-to-charles-stanley-direct" target="_blank" rel="noopener">this link</a>. Terms apply – <a href="https://monevator.com/go-to-charles-stanley-direct" target="_blank" rel="noopener">Charles Stanley</a></p></p>
<p>Care-home fee black spots – <a href="https://www.thisismoney.co.uk/money/bills/article-14765445/I-sell-parents-home-pay-care-areas-care-homes-self-funders-council-threshold.html" target="_blank" rel="noopener">This Is Money</a></p>
<p><p>Get up to £100 as a welcome bonus when you open a new account with InvestEngine via <a href="https://monevator.com/go-to-investengine" target="_blank" rel="noopener">our link</a>. (Minimum deposit of £100, T&Cs apply. Capital at risk) – <a href="https://monevator.com/go-to-investengine" target="_blank" rel="noopener">InvestEngine</a></p></p>
<p>Nintendo Switch 2 review – <a href="https://www.ign.com/articles/nintendo-switch-2-review" target="_blank" rel="noopener">IGN</a></p>
<p>Homes for sale in cultural hotspots, in pictures – <a href="https://www.theguardian.com/money/gallery/2025/jun/06/homes-for-sale-in-cultural-hotspots-in-england-in-pictures" target="_blank" rel="noopener">Guardian</a></p>
<h3>Comment and opinion</h3>
<p>US safe-haven status in peril – <a href="https://paulkrugman.substack.com/p/we-are-no-longer-a-serious-country" target="_blank" rel="noopener">Paul Krugman </a></p>
<p>FIRE sceptic rethinks their biases – <a href="https://www.morningstar.com/personal-finance/my-baptism-by-fire-lessons-financial-independence" target="_blank" rel="noopener">Morningstar</a></p>
<p>How to avoid the big investing mistakes – <a href="https://behaviouralinvestment.com/2025/06/03/what-is-the-behaviour-gap-and-how-can-investors-close-it/" target="_blank" rel="noopener">Behavioural Investment</a></p>
<p>How to rationalise dreadful investment losses <em>[Satirical]</em> – <a href="https://www.acadian-asset.com/investment-insights/owenomics/a-loss-is-just-a-gain-that-hasnt-happened-yet" target="_blank" rel="noopener">Acadian</a></p>
<p>The UK doesn’t have a productivity puzzle – <a href="https://www.ft.com/content/583a30e1-f411-40b2-bf60-8102634a6a3c" target="_blank" rel="noopener">FT</a></p>
<p>Investors do better in target-date funds – <a href="https://www.morningstar.com/funds/vanguard-target-date-fund-investors-bought-sold-themselves-an-extra-23-billion" target="_blank" rel="noopener">Morningstar</a></p>
<p>Does small cap value improve your safe withdrawal rate? <em>[Plus ERE vs The Golden Butterfly portfolio]</em> – <a href="https://earlyretirementnow.com/2025/06/02/small-cap-value-swr-series-part-62/" target="_blank" rel="noopener">Early Retirement Now</a></p>
<p>Value is working quite nicely outside of the US – <a href="https://www.morningstar.com/stocks/why-value-investing-has-worked-better-outside-us" target="_blank" rel="noopener">Morningstar</a></p>
<p>Sage investment wisdom from Benjamin Graham x Jason Zweig – <a href="https://www.evidenceinvestor.com/post/ten-timeless-investment-lessons-from-the-intelligent-investor" target="_blank" rel="noopener">TEBI </a></p>
<p>Common FIRE traps not to fall into – <a href="https://jordangrumet.substack.com/p/am-i-anti-fire" target="_blank" rel="noopener">The Purpose Code</a></p>
<p>The dangers of home bias versus the UK growth agenda – <a href="https://notes.archie-hall.com/p/the-trouble-with-home-bias" target="_blank" rel="noopener">Archie Hall</a></p>
<p>Choosing where to live after financial independence <em>[Slides – US but translates]</em> – <a href="https://drive.google.com/file/d/1_lLHzCOrxB59kd0kDur1nEKDbwQIgHG6/view" target="_blank" rel="noopener">Harry Sit</a> <em>[Video version – <a href="https://www.youtube.com/watch?v=lsJ_BC0ZlDk" target="_blank" rel="noopener">Harry Sit</a> via Bogleheads]</em></p>
<h3>Naughty corner: Active antics</h3>
<p>To earn the big bucks you’ve got to take the big losses <em>[Research paper]</em> – <a href="https://www.morganstanley.com/im/publication/insights/articles/article_drawdownsandrecoveries_ltr.pdf" target="_blank" rel="noopener">Morgan Stanley</a></p>
<p>Using ChatGPT to optimise your trading strategy – <a href="https://quantpedia.com/can-we-finally-use-chatgpt-as-a-quantitative-analyst/" target="_blank" rel="noopener">Quantpedia</a></p>
<p>Don’t bet against AI stocks say Wall Street analysts – <a href="https://sherwood.news/markets/wall-street-pain-trade-ai-stocks-rally-nvidia-broadcom/" target="_blank" rel="noopener">Sherwood</a></p>
<p>Hedging AI risk – <a href="https://awealthofcommonsense.com/2025/06/the-biggest-risk-the-biggest-opportunity/" target="_blank" rel="noopener">AWOCS</a></p>
<p>Life is harsh (and short) for underperforming funds – <a href="https://jeffreyptak.substack.com/p/death-is-a-drag" target="_blank" rel="noopener">Jeffrey Ptak</a></p>
<p>Bitcoin ETFs are up! – <a href="https://humbledollar.com/2025/05/up-because-its-up/" target="_blank" rel="noopener">Humble Dollar</a></p>
<p><span style="font-weight: 400;">Pudgy Penguin NFT ETF = End Times – <a href="https://www.ft.com/content/0232809d-4d22-4dba-8462-603bd15bd3da" target="_blank" rel="noopener">FT</a></span></p>
<p>If you like risk, you’ll love Bitcoin treasuries – <a href="https://www.thisismoney.co.uk/money/investing/article-14787355/SMALL-CAP-MOVERS-Bitcoin-treasury-firms-crowd-Londons-junior-market.html" target="_blank" rel="noopener">This Is Money</a></p>
<h3>Kindle book bargains</h3>
<p><em>How to Own the World</em> by Andrew Craig – <a href="https://amzn.to/4jyGzKh" target="_blank" rel="noopener">£0.99 on Kindle</a></p>
<p><em>The Algebra of Wealth</em> by Scott Galloway – <a href="https://amzn.to/43zztRn" target="_blank" rel="noopener">£0.99 on Kindle</a></p>
<p><em>The Big Short</em> by Michael Lewis – <a href="https://amzn.to/4kphfI9" target="_blank" rel="noopener">£0.99 on Kindle</a></p>
<p><em>Skunk Works: A Memoir of My Years at Lockheed</em> by Ben Rich – <a href="https://amzn.to/4jtJ94c" target="_blank" rel="noopener">£0.99 on Kindle</a></p>
<p>Or pick up one of the all-time great investing classics – <a href="https://shop.monevator.com/" target="_blank" rel="noopener"><em>Monevator</em> shop</a></p>
<h3>Environmental factors</h3>
<p>Green-hushing: ESG survival strategy in the Age of Trump – <a href="https://www.semafor.com/article/06/05/2025/blackrock-is-writing-a-playbook-for-navigating-the-esg-backlash" target="_blank" rel="noopener">Semafor</a></p>
<p>Why batteries make a renewables-powered energy grid affordable [US but translates] – <a href="https://www.construction-physics.com/p/can-we-afford-large-scale-solar-pv" target="_blank" rel="noopener">Construction Physics</a></p>
<p>Hybrid electric vehicle sales rocket in the US – <a href="https://sherwood.news/tech/a-record-1-in-8-cars-sold-in-america-is-now-a-hybrid-estimates-show/" target="_blank" rel="noopener">Sherwood</a></p>
<h3>Robot overlord roundup</h3>
<p>How AI is infiltrating the movies – <a href="https://www.vulture.com/article/generative-ai-hollywood-movies-tv.html" target="_blank" rel="noopener">Vulture</a></p>
<p>Why AI isn’t leading to mass sackings (yet) – <a href="https://www.dwarkesh.com/p/timelines-june-2025" target="_blank" rel="noopener">Dwarkesh</a></p>
<h3>Not at the dinner table</h3>
<p>Trump vs Musk: Gasbags at dawn – <a href="https://edition.cnn.com/business/timeline-elon-musk-trump-x-dg" target="_blank" rel="noopener">CNN</a></p>
<p>Apparently we’re at war with Russia – <a href="https://www.theguardian.com/politics/2025/jun/06/russia-is-at-war-with-uk-and-us-no-longer-reliable-ally" target="_blank" rel="noopener">Guardian</a></p>
<p>Reaction to the UK Strategic Defence Review <em>[Podcast]</em> – <a href="https://www.chathamhouse.org/2025/06/independent-thinking-war-plan-or-wish-list-uk-strategic-defence-review" target="_blank" rel="noopener">Chatham House</a></p>
<p>Trump family get into bed with crypto bros <em>[Voms]</em> – <a href="https://www.wsj.com/finance/currencies/bitcoin-goes-all-in-on-maga-shedding-its-antigovernment-slant-2f1bb3d0?st=GZT12X&reflink=desktopwebshare_permalink" target="_blank" rel="noopener">WSJ</a></p>
<h3>Off our beat</h3>
<p>How Ukraine’s audacious drone attack stuck it up Putin’s bombers – <a href="https://www.csis.org/analysis/how-ukraines-spider-web-operation-redefines-asymmetric-warfare" target="_blank" rel="noopener">CSIS</a></p>
<p>The genius myth <em>[Paywall]</em> – <a href="https://www.theatlantic.com/ideas/archive/2025/06/high-iq-intelligence-myth/683023/" target="_blank" rel="noopener">Atlantic</a></p>
<p>Contrarian views on the big five mass extinctions <em>[Paywall] </em>– <a href="https://www.newscientist.com/article/2481371-theres-growing-evidence-the-big-five-mass-extinctions-never-happened/" target="_blank" rel="noopener">New Scientist</a></p>
<h3>And finally…</h3>
<p>“Owning the stock market over the long term is a winner’s game, but attempting to beat the market is a loser’s game.”<br />
– Jack Bogle, <a href="https://amzn.to/3Ze9VGN" target="_blank" rel="noopener"><em>The Little Book of Common Sense Investing</em></a></p>
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<p>From the earliest days of <em>Monevator</em> I’ve <a href="https://monevator.com/try-saving-enough-to-replace-your-salary/" target="_blank" rel="noreferrer noopener">betrayed a soft spot</a> for income investing. My 2008 article at the end of that link doesn’t claim pursuing income will beat the market. But I did suggest it might be a mental better fit for some people in retirement.You discount psychology in investing at your peril.</p>
<p>To be sure though, my timing wasn’t great.</p>
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<p>How might we design a portfolio to live off indefinitely?</p>
![Hot: A portfolio for life: the natural yield approach to drawdown [Members]](/public/default.jpg)
