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What are the tax implications of pension redirect?

Contributions

When you pay into a pension scheme, you get tax relief on your contributions; effectively this means the government are paying into your pension too.

However, when you pay into an ISA or a GIA, you don’t get tax relief on your contributions and you have to pay tax and national insurance on any of the employer’s pension contributions that are now being paid into an ISA or GIA.

Investment growth

Whether you pay into a pension or an ISA, any interest earnings or investment growth you earn is tax-free.

However, with a GIA, you will have to pay tax on any interest earnings or investment growth.

Taking money out

With a pension, you can access your funds at any time from age 55 and 25% of your fund can be taken as a tax-free lump sum. Any amounts you take in excess of this are subject to tax.

However, any money you withdraw from an ISA is tax-free.