WITH under four weeks to go until the end of the 2018/19 tax-year, the clock is ticking to make the most of the various tax allowances before midnight on April 5.

Chief among these are allowances for individual savings accounts (Isas) and pensions. These form the two key pillars of the UK’s long-term tax-efficient investment system with almost £29 billion invested into stocks and shares Isas in the previous tax year and an estimated £25bn into personal pensions alone.

Inevitably, many investors face a conundrum in the coming weeks: which of these two key allowances should they prioritise? In short: which is nicer, a pension or an Isa?

When it comes to the hard numbers, pensions come out top in the battle between the UK’s two leading tax efficient allowance. While returns made within both Isas and pensions are both out of the reach of the taxman, pensions are turbo-charged at the outset by upfront tax relief equivalent to the basic rate of tax. This means an £8,000 personal subscription into a pension will be topped-up by the Government by £2,000, resulting in a £10,000 investment.

Pensions are even more compelling for those on the higher or additional rates of tax. Alongside the top up the Government makes into their pension, these taxpayers can achieve a reduction on their income tax bill for the year so that total tax relief received is at their marginal rate.

With more invested at the outset, a fund bought within a pension is destined to deliver a higher return than the same fund purchased within an Isa. To illustrate this, imagine a £10,000 investment into a fund that grows at six per cent per annum after costs over 20 years. In the case of an Isa this would end up at £32,071. If the same amount were contributed through a pension it would be topped up by £2,500 to £12,500. This higher initial investment would result in a sum of £40,089 over the same period.

However, while pensions have the edge on tax perks, especially for those subject to the higher rates of tax, Isas win easily when it comes to flexibility. While rule changes introduced in 2015 have transformed the options for how pension pots can be used, the earliest point savers can access their pension is when they turn 55. And, while an entire pension pot can now be cashed in, the amount that can be taken as a tax-free lump sum is restricted to 25%. Withdrawals above this level are subject to the investor’s marginal rate of income tax.

Withdrawals from Isas, in contrast, whether taken as income or capital, are entirely free of tax at any point and do not need to be disclosed on a tax return. This makes Isas ideal for many goals unrelated to retirement, such as paying-off a mortgage, saving for a child’s education, wedding costs, holidays or to provide a rainy day fund.

In weighing up the merits of each, a further consideration might be how these two schemes could be treated on death as more and more people are falling into the trap of inheritance tax. Last year this raised £5.2bn for the Treasury.

In the case of Isas, when a person dies their surviving spouse or civil partner is provided with a one-off additional allowance equivalent to the value of their deceased partner’s Isa, so they can chose to reinvest in their own name and preserve the value of the tax allowances. However, Isas cannot be passed on to future generations or to other beneficiaries and will form part of an estate for inheritance-tax purposes on the death of the surviving partner.

In contrast, pensions are now a very attractive route for passing wealth on, as any remaining assets in them are not be subject to inheritance tax. These can be left to whomever you chose. Depending on how old you are when you die, your beneficiaries may still have to pay income tax on the money received. If you die before age 75 the beneficiary will have no tax liability, though after your 75th birthday beneficiaries may need to pay income tax at their own income tax rate.

In truth, both pensions and Isas have strong attractions and the choice will depend on what you are trying to achieve. In the battle of the tax allowances, I’m calling it a draw.

Jason Hollands is managing director of wealth management group Tilney.