“Anyone putting money aside for retirement should be looking at the benefits of a SIPP vs ISAs. Both have their advantages; ISAs offer completely tax-free interest and investment returns and have no tax requirement on money you withdraw. SIPPs offer an additional 20 percent in tax relief when you contribute to your savings pot and have no tax on capital gains. The good news is that you can have both a SIPP and an ISA and use them to support each other.”

Frazer Fearnhead, founder of The House Crowd and author of The Alternative Guide To Property Investment.


 In the face of dissatisfactory interest rates offered by banks, many people turn to alternative means of investing their capital and saving for retirement. With so many investment options out there, it can all get a bit overwhelming.

Two of the most commonly researched retirement savings solutions are ISAs and SIPPs, largely because of their significant tax advantages. In this guide we’ll focus in on the difference between SIPPs vs ISAs, evaluating the pros and cons of both. Sound good? Let’s dive in.


A self-invested personal pension (SIPP) is an alternative for those who want to have more control over their pension fund and the power to determine how and where they are invested.

It’s essentially ‘a do it yourself’ pension. You have the means to invest in a wide variety of different assets, giving you much more scope for great returns than traditional pension solutions. SIPPs are generally managed online and look very similar to a typical online banking portal, making them an attractive and simple proposition to manage.

SIPPs allow investors to consolidate their existing pension funds that they’ve accumulated over the years.

As with all investments, SIPPs aren’t immune to risk and do offer the potential for you to lose what you put in. It’s also worth bearing in mind that since SIPPs are self-managed, you will not receive any investment advice, potentially increasing the level of risk your pension fund is exposed to.

Martin Tilley, a directory of technical services at pension management company Dentons outlines that one of the fundamental characteristics that attracts investors to SIPPS is the fact that they allow investment into commercial property. He noted “Interest in property is growing. If you go back five years, one in four people bought commercial property through their SIPP. That figure fell to one in 20 after the property crash, but it’s now back up to one in six people.”

Minimum investment: Dependent on your SIPP provider

Maximum investment: Up to 100% of your earnings (tax-relief only available on £40,000)

Fees: SIPPs often have fixed fees instead of percentage-based ones. The ability to combine multiple pensions into one place reduces the payable fees and since no investment advice is being provided, you won’t need to pay for it.

Tax regulations/advantages:

  • Tax relief of 46% available on investments up to £40,000. For those with a high income (over £150,000) the annual allowance is tapered and the maximum reduction is £30,000
  • No tax on income, other than equity dividends & no tax on capital gains

Interest rates: Dependent on your SIPP provider. The House Crowd’s property backed SIPP offers 10% p.a.

What can I invest in with a SIPP?

  • Stocks and Shares
  • Investment trusts listed on any stock exchange
  • UK government bonds, plus bonds issued by foreign governments
  • Open ended investment companies which are recognised by the Financial Conduct Authority
  • Gilts and bonds
  • Exchange traded funds traded on the London Stock Exchange or other European markets
  • Bank deposit accounts including non-Sterling accounts
  • Commercial property
  • Real estate investment trusts listed on any stock exchange
  • Offshore funds

For more information on SIPPs, see our What is a SIPP? blog.


ISAs come in different shapes and sizes but all share some similar traits, namely tax-free interest Let’s have a look at how they stack up:

Cash ISAs

Cash ISAs have typically been the most popular ISA type. They’re straightforward and similar to a basic savings account you’d hold with a high street bank.

Their tax advantages are significant: you don’t have to pay any tax on the interest you earn. A Cash ISA will also have a limit as to how much you can transfer into it in a single tax year, typically £20,000.

While they do offer a safe, tax-free haven for your savings, the returns are often low and somewhere between one and two percent. This rate of return realistically means that returns will be cancelled out over time by natural inflation.

Taking the above into consideration, Cash ISAs aren’t the solution for anyone looking to make substantial returns over the long term.

Minimum investment: Dependent on your ISA provider

Maximum investment: Up to £20,000 per tax year

Fees: Cash ISAs often have no fees

Tax regulations/advantages: No tax payable on gained interest

Interest rates: Dependent on your ISA provider


Stocks and Shares ISAs

Stocks and Shares ISAs operate by the same core principle as other ISAs, that of tax-free returns. As you may have surmised, the potential capital gains from a Shares ISA are significantly superior to that of a bank-based Cash ISA, which in one sense makes them a more attractive retirement savings option.

On the other hand, Stocks and Shares ISAs are vastly more volatile and less predictable. Stocks and Shares are easily over or undervalued, too. Most often with Shares ISAs your investment choices are handled for you after you agree to a level of risk from a pre-determined set of options. Typically Stocks and Shares ISAs are seen as longer-term investments so accessing your money quickly may be harder.

The annual contribution limit for Stocks and Shares ISAs is also £20,000. If you have multiple ISA types (e.g. one Cash ISA and one Stocks and Shares ISA) you can split this between them, or you can contribute the entire allowance towards one account.

Minimum investment: Dependent on your ISA provider

Maximum investment: Up to £20,000 per tax year

Fees: Dependent on your ISA provider.

Tax regulations/advantages: No tax payable on gains from shares, dividends or bonds.

Interest rates: Dependent on market performance and your selected shares, stocks and bonds.


Lifetime ISAs

Lifetime ISAs (LISAs), enable you to save up to £4,000 a year in a tax-free account and the government will top you up with an additional 25%. For example, if you save the top £4,000 allowance in a given tax year, you’ll receive £1,000 from the state (and that’s before any interest).

LISAs are designed for either first time home buyers, or those saving for retirement. To open one you must be between the ages of 18 and 39. And it’s definitely worth noting that once you have contributed to your LISA it’s locked in; you can’t transfer it to another account and you’ll pay a penalty if you withdraw it for a first property or retirement.

LISAs can come in the form of Cash LISAs or Stocks and Shares LISAs.


Minimum investment: Dependent on your ISA provider

Maximum investment: Up to £4,000 per tax year

Fees: Dependent on your ISA provider. Likely to vary between Cash LISAs and Stocks and Shares LISAs

Tax regulations/advantages: No tax payable on gains from interest, shares, dividends or bonds.

Interest rates: Dependent on your ISA provider


Innovative Finance ISAs

Placing a spin on the traditional ISA, IF ISAs allow for investment in a variety of assets not typically associated with traditional lenders.

Introduced in April 2016, they cut out the need for a bank and put the lender in direct contact with the borrower, in turn speeding up the process and facilitating the opportunity for the lender to earn more interest. It’s important to bear in mind prior to any investment that peer to peer lending investments and alternative finance in general doesn’t offer the same sort of protection as traditional institutions (up to £85,000 in compensation from the Financial Services Compensation Scheme).

However, while IF ISAs (as with all types of alternative lending) can be riskier than their traditional counterparts, they do offer the potential to be much more lucrative. These days many IF ISA providers allow investors to transfer their ISAs into IF ISA accounts making the IF ISA more accessible than ever before. This type of ISA can be based on secured and unsecured loans so it’s very important to acquaint yourself with the involved risk before you make a final decision.

Minimum investment: Dependent on your IF ISA provider

Maximum investment: £20,000 per tax year

Tax regulations/advantges: No tax on investment returns

Interest rates: Dependent on your IF ISA provider.

A big advantage of IF ISAs by comparison to Cash ISAs is the higher interest rates. The average interest rate on an IF ISA is around the 6 percent mark. IF ISA providers can offer a much higher rate because there isn’t a bank or building society in the way to manage the account or take a cut of your interest.

The House Crowd’s IF ISA earns a tax-free seven percent p.a. and allows for compounding interest.

Fees: Dependent on your IF ISA provider

What can I invest in with an IF ISA?

  • Fixed income bonds
  • Property development projects
  • Property
  • Businesses
  • Crowd bonds funding small businesses
  • Green energy projects
  • Public and private businesses
  • Infrastructure projects

So, SIPPs vs ISAs, can you have both?

Yes, you can have a SIPP and an ISA. While each type of investment may have its own distinct characteristics, it’s important to acknowledge that by combining the two, you could in fact experience a far greater benefit.

After all, diversification is one of the most commonplace strategies within the world of investment. The more you spread out your capital, the more you reduce the risk of experiencing substantial loss.

Hopefully that has cleared up your questions regarding SIPPs vs ISAs. Want to find out more about the benefits of property backed SIPPs and IF ISAs? Get in touch with our member-support team today or register for an account.

Capital is at risk and rates are not guaranteed. Withdrawals may be restricted due to illiquidity. Investments are not covered by the Financial Services Compensation Scheme (FSCS). Please read our full risk warning.