The optimal order for investing in the UK

When it comes to saving or investing your money in the UK, there's no shortage of options – or opinions.

But what is the best order to follow? In this guide, we're using insights from financial advisers and solid academic research to break it down step-by-step.

1) Pension match contributions

If you're young and spritely, you might look at the old and wrinkled as a different species – thinking, "That'll never be me". But as Grandpa Simpson once warned Homer, "It'll happen to you too!"

Grandpa isn't wrong: UK life expectancy at birth is now 79 for men and 83 for women.

But don't let averages mislead you. Plenty of us end up living well into our 90s. In fact, the number has been rising steadily year-on-year:

That's plenty of time after hitting 65 to regret not saving enough.

Indeed, late 60s, which we fondly imagine as a time for garden sheds and cruise ships, is now prime working age for many. From April to June 2022, a record 1.47 million people aged 65+ were still grafting in the UK. Since 2000, that number has tripled.

Sure, some genuinely love their jobs – lucky devils – but how many are scanning groceries, stacking shelves, or braving cold, wet mornings not for the thrill of work but because they just didn't stash enough cash away?

There's a way to help with this, though: make your retirement someone else's problem.

Employers must chip in at least 3% of your qualifying earnings (£6,240–£50,270 for 2025/26) into your workplace pension, while you'll stump up about 5% – totalling 8% on the qualifying amount.

This does not mean you're getting 8% on your salary overall, only on the qualifying earnings bracket we noted above. On a £30,000 salary your real contributions would be around 6.3%, and on a £100,000 salary they would only be around 3.5%.

Pension contributions from your employer are literally free money.

And most people are taking it up: 88% of eligible Brits are contributing to their pensions, though 22% in the private sector still opt out or aren't enrolled due to low earnings.

If your employer offers larger contribution matches, make use of it. Some might offer matches outside of the qualifying earnings bracket – some might offer matches up to 10% or more.

The most generous example we've seen is for every £1 you put away, the employer puts £6 away!

Obviously this is a rare case, but it's worth highlighting because pension contributions are probably quite low on the list of priorities when people look for employment. But, if you're lucky enough to have a choice of employers, this is something that should be heavily considered.

Starting early makes a huge difference to your retirement savings.

The chart below shows the difference the age you begin contributing can make to your pension pot by 65 if you put away £5,000 a year at a conservative 5% average annual increase:

See the difference? Start young, and compound interest will reward you handsomely. Start late, and you might still be working when you're frail while your friends are sipping a gin and tonic in Marbella.

All of that said, this only applies to those on defined contribution pensions.

If you're lucky enough to be in a defined benefit (DB) scheme, you could still consider overpaying, but you're probably not going to get the free money aspect unless your scheme specifically offers ways to boost your benefits through additional contributions. Other options on this list may be more efficient to prioritise if this isn't the case.

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2) Insurance

Many dismiss insurance, thinking, "I'll probably never need it."

Well, at Financial Interest, both co-founders have suffered unfortunate events that totally changed their perspective on the need for cover:

• Damien got knocked out cold in a random unprovoked attack on a night out, suffering permanent facial damage that could have led to lifelong career and health issues
• Luke discovered he had cancer at the age of 27, just a few years ago.

While they've both made a full recovery, neither had any form of insurance or income protection – something they both regret to this day.

Trust us: these life-altering scenarios are scary, stressful, can happen to anyone at any time, and they're made all-the-worse by worries of not being able to work and pay the bills.

Insurance is something that's really important to prioritise.

Sadly, insurance is a minefield, packed with get-out clauses written in the fine print. This means even for those who try to get themselves covered, you can end up paying for something that still leaves you empty-handed when you make a claim.

To help with this, we've partnered with a couple of trusted brokers that you should talk to if you want to get the most relevant policy for your needs.

They'll provide fee-free advice, earning a commission from the insurance companies directly – just like a comparison site would. They work with a panel of insurers to ensure you get competitive rates while still getting a product that actually covers you.

They can look at your requirements for life cover, critical illness cover, income protection, business protection, group protection, and inheritance tax protection.

We have two recommendations:

The first is LifeSearch, a very large company listed as an "advised broker to try" on Martin Lewis's Money Saving Expert. Damien used their services when securing his own insurance.

The second is Heath Protection, a smaller and more bespoke service, whose founder has appeared on Damien's Making Money podcast before, so many of you may be familiar with the company already.

As of 2024, only 14% of UK adults had income protection insurance, and just 12% had critical illness cover.

Meanwhile, the standard UK statutory sick pay is only £118.75 per week, whereas average household spending ranges from £500 to £600 weekly. That's a worrying gap to make up if you're unable to work.

In 2024, musculoskeletal issues like back and neck pain were the top reasons for income protection claims in the UK.

This type of cover is even more crucial if your job is physically demanding – a carpenter with back trouble faces far greater challenges than an office worker might. 

Separately, when it comes to critical illness cover, cancer is consistently one of the most common reasons people make a claim. And with half the UK population being diagnosed at some point in their lifetime, it's a sad fact that many of us will face this problem ourselves.

In short: insurance can provide another form of safety net to fall back on on a rainy day. And sadly, it rains pretty often in the UK, so you should really make sure you're covered.

3) High-interest debt

“Debt is the slavery of the free,” as Publilius Syrus wisely put it.

More than three in five UK adults carry some form of debt, and a quarter lose sleep over it – some might say it's a leading cause of insomnia in Britain, second only to tea.

And how did they get there?

Well, the temptations are more numerous than apples in the Garden of Eden. According to our UK Savings Report 2025, 32% of households have credit card debt, 9% are in their overdraft, and 15% have personal loans.

But why pay down debt instead of investing in the stock market and making some Warren Buffett-style moves?

Well, consider this: the average Annual Percentage Rate (APR) on UK credit cards was 35.55% in January 2025. Even Buffett himself would struggle to get anywhere near that return.

Think of paying down high-interest debt as a guaranteed return on investment – you’re saving yourself from owing even more money later, stopping that snowball before it turns into an avalanche.

Of course, this doesn't apply to lower-interest debt like your mortgage or student loans – think anything under about 5–6%.

But here's the sad thing: in 2023, 31% of British adults with credit cards made only the minimum payment each month.

Now, if you’re scraping by, making the minimum payment is still an achievement. But if you've got spare cash, slashing that high-interest debt should absolutely be your next move after securing pension match contributions and protecting your income with insurance.

"You can't save for tomorrow when you're still paying for yesterday" – a random bald man at Financial Interest HQ.

4) Emergency fund

It’s raining, it’s pouring, the old man’s snoring – and hasn’t put away cash for the leaky roof.

If it’s not the roof springing a leak, it could be your car deciding it no longer wants to get out of bed in the morning, or maybe a front tooth chipping, leaving you whistling through conversations like a kettle at tea-time.

Even worse, it might be a sudden job loss, leaving you with bills piling up but no payday in sight to save you.

Once again, our data shows just how many Brits are unprepared for those nasty surprises life loves to throw our way:

• 20% of UK households are in debt
• Another 15% have less than £500 spare.

That’s a lot of people walking a financial tightrope without a net beneath them. You might be riding high in April, but remember what Ol’ Blue Eyes warned: you could be shot down in May – that’s life.

To take the sting out of those inevitable scrapes, aim for a rainy-day fund of three to six months’ worth of expenses. But even setting aside just £1,000 is enough to help you breathe easier next time life decides to remind you who's boss.

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5) ISAs

ISAs are fantastic, tax-efficient accounts designed to protect your investments from capital gains tax and income tax on dividends or interest. 

Each tax year, you can deposit up to £20,000 across all your ISAs combined. The main varieties include cash ISAs, stocks & shares ISAs, and lifetime ISAs (LISAs). 

Cash ISAs are the most popular, accounting for 63.2% of subscriptions in the 2022/2023 tax year, probably because they're straightforward, low-risk, and perfect for those who prefer their savings safe and easy to access. 

Stocks & shares ISAs, making up 30.6% of subscriptions, attract investors looking to lock away their money for longer in exchange for potentially higher returns. 

Finally, LISAs, with a separate annual limit of £4,000, are specifically aimed at buying your first home or saving for retirement. However, you can't access LISA funds without penalty until age 60 unless used for your first home purchase, making them less flexible compared to other ISA types.

There’s also an innovative finance ISA, but in this article we'll focus on stocks & shares ISAs.

Pensions are generally the superior choice for retirement savings, especially for higher-rate or additional-rate taxpayers, due to tax relief on contributions – a benefit ISAs don’t offer, as contributions come from after-tax income.

However, the key advantage of ISAs is that all withdrawals – capital gains or dividends – are entirely tax-free.

Despite this incredible benefit, here in the UK, we're shockingly bad at utilising this benefit to the fullest. In fact, data from gov.uk confirms that even amongst high earners, only around 20-40% use their whole ISA allowance:

The main reason we emphasise ISAs alongside a workplace pension or a SIPP is their incredible flexibility.

Picture yourself retired, enjoying life and suddenly wanting a little extra cash for a spontaneous cruise or home renovation. With an ISA, you can dip in anytime you like without tax implications.

This flexibility makes ISAs a perfect companion to pensions in retirement, helping you juggle your finances to make the most of your money.

From April 2028, pension withdrawals won't be accessible until age 57, and this age is likely to rise further in the future.

Plus, pension income is taxed like regular income. Sure, you can withdraw 25% tax-free from your pension, either as a lump sum or gradually, but anything above that gets taxed at income tax rates. 

Add in that your personal allowance can be partly eaten up by the State Pension, and things get tricky.

On the other hand, ISAs are like having a cookie jar on your kitchen counter – you can grab a treat whenever you fancy, without any hassle or penalties.

Ultimately, rules and regulations will inevitably change between now and retirement. Having a diversified mix of accounts – with different tax treatments and flexibility – allows you to minimise your tax liability when you retire.

If you're already contributing to a workplace pension, you're benefiting from the main retirement savings advantages like tax relief.

In this scenario, an ISA becomes even more valuable because it adds flexibility and easy access to your savings – this is why we suggest prioritising ISAs over SIPPs. Next, we'll discuss SIPPs in more detail.

If you retire early and have ISA savings, you can use your ISA to fund pension contributions and get tax relief in the process.

Since ISA withdrawals are tax-free, you can take money out and reinvest it into your pension, where the government tops it up with tax relief – turning £80 into £100 (basic rate) or even £60 into £100 (higher rate).

This can be a smart move if you expect to be in a lower tax bracket in retirement, meaning you'll pay less tax when you withdraw your pension later. Essentially, you're swapping tax-free ISA money for a bigger pension pot, maximising government top-ups while keeping future tax bills low.

6) SIPPs

SIPPs (Self-Invested Personal Pensions) are another important retirement tool, offering a way to save independently for your retirement with attractive tax relief on contributions.

If you're self-employed, SIPPs should be a higher priority – right after paying off high-interest debt – because you won't have an employer pension scheme to benefit from matched contributions.

For those employed, however, taking full advantage of employer-matched contributions usually makes more sense. If you've maxed these out, though, you could choose to open a SIPP alongside your workplace pension.

It can also be a great option if you've got an old workplace pension lying dormant, no longer benefitting from employer contributions. By moving these to a SIPP, you could potentially pay lower fees, and you'll get better control of how your money is invested.

Unlike a stocks & shares ISA, where you pay tax upfront on your contributions but pay no tax when withdrawing, SIPPs give you a tax break upfront – meaning the government adds money to your contributions.

However, when you retire, you pay income tax on withdrawals, except for a 25% lump sum that's tax-free.

In short:

• ISA: Pay tax now, nothing later
• SIPP: Get tax relief now, pay tax later.

Which one is better depends on whether you expect to pay higher taxes now or later. Many people use both to get the best of both worlds.

SIPPs often work better if you're a higher-rate taxpayer now and expect to be in a lower tax bracket when you retire, whereas ISAs might suit you better if you anticipate being in a higher tax bracket in retirement.

Many people use both: SIPPs for upfront tax benefits and ISAs for flexible, tax-free withdrawals later.

If you're a basic rate taxpayer and you like the look of a SIPP, you can also consider prioritising a Lifetime ISA to get the same tax rebate but with the ability to withdraw everything tax-free when you retire.

7) General Investment Account (GIA)

So, you've maxed out your ISA and pension allowances – nice problem to have. But where do you put you spare cash now? Enter: the General Investment Account (GIA).

Unlike ISAs and pensions, GIAs offer no special tax breaks, but they have no contribution limits either, giving you full flexibility over how much you invest and when you take your money out.

This option can make a lot of sense for someone who already has significant pension savings and doesn't want to lock away even more money until age 57. Pensions come with great tax perks, but they're not much use if you need access to your cash before retirement.

A GIA lets you stay invested without committing your money for the long term, making it a useful bridge between accessible savings and locked-away retirement funds.

Of course, without the tax perks of ISAs and pensions, you'll have to be mindful of tax.

The first £500 of dividend income, £3,000 of capital gains (2025/26 tax year), and up to £1,000 of savings interest (depending on your tax band) are tax-free. Anything above these allowances will be taxed, but there are ways to soften the blow.

If you're married or in a civil partnership, and your other half is in a lower tax bracket, holding investments in their name can reduce your household tax bill – just another perk of matrimony, right up there with shared Netflix passwords and someone else making you tea.

To make the most of your tax-free allowances, you could be strategic about where you hold different assets.

For instance, consider putting investments with lower upside in your GIA, because you anticipate the long-term profits will be lower and therefore so will your tax bills, keeping your higher upside investments in a tax efficient account.

You can also gradually move investments from your GIA into your ISA each tax year (a strategy known as 'Bed & ISA'). This involves selling assets in the GIA and repurchasing them inside your ISA to shelter future gains from tax. Think of it like sneaking your investments one by one into a VIP lounge where HMRC can't touch them.

For those with larger sums (minimum initial investment of £100,000), another step up from a GIA could be an Offshore Bond.

Don't worry, this isn't some shady tax-dodging scheme in the Cayman Islands – just a perfectly legitimate investment account typically based in places like Ireland or the Isle of Man.

Offshore Bonds let you defer tax until you withdraw money, allowing you to pick a tax-friendly moment – such as a year when your income (and therefore tax rate) is lower. You can even draw down up to 5% per year of the original investment without triggering immediate tax, making it a flexible option for careful tax planning.

A GIA (or an Offshore Bond, if you've got deeper pockets) isn't the first port of call for most investors, but they're practical and flexible places to put additional cash that needs a home – especially if you've already filled your pensions and ISAs to bursting point.

8) Yourself

At the risk of sounding like one of those insufferable self-help gurus whose ads we all skip on YouTube, investing in yourself really can boost your earnings and open doors to greater success.

This doesn't have to mean filling a bookshelf next to your Lambo with self-improvement books. 

It could be something as practical as enrolling in an educational course, buying a sharp suit for that important meeting, or upgrading your home office setup to boost productivity.

It might also include attending workshops or networking events, subscribing to industry-related magazines or apps to stay informed, or investing in health and fitness memberships to maintain your energy and focus. 

Don't be tight fisted when it comes to splurging a bit on yourself – it might just be the best investment you make.

The trick is to make sure you're actually bettering yourself, rather than hoping the mere act of purchasing something was enough to get you a promotion and a pay rise.

9) Overpaying your mortgage

With mortgage interest rates averaging around 4.90% for a two-year fixed deal as of February 2025, it's tempting to think, "Let's just pay off the mortgage and be done with it." 

Yet global index funds have historically returned around 10% per year, potentially outperforming mortgage interest savings over the long term – though there's no guarantee that markets will behave as expected.

This leaves many people questioning whether it's better to overpay their mortgage or invest in the stock market.

Ultimately, this decision comes down to personal preference: some people prefer the peace of mind that comes with being mortgage-free sooner, others accept more risk by investing in the stock market in the hope of a greater long-term return.

Of course, decisions don't need to be binary – you can always opt for a hybrid approach in proportions that suit your appetite for risk and security.

10) Property investing

Another angle many people consider is investing directly into property.

Across all five-year rolling periods since 1985, property has risen in value faster than inflation 85% of the time.

But before you pop on a top hat and start eyeing hotels on Park Lane, bear in mind that real-life property investing isn't as simple as a board game. While property can offer solid returns, it's often very far from being passive income – from midnight phone calls about faulty toilets to weekends spent dealing with maintenance issues and chasing tenants for late rent.

Outsourcing management is an option, but fees typically take around 10% to 15% of your monthly rental income, eating into your profits.

However, property investing might still make sense if you have a natural advantage when it comes to adding value – perhaps you're particularly handy around the house, a qualified tradesperson, or simply have plenty of spare time and patience to handle the everyday challenges that come with being a landlord.

11) Your kids’ future

Your children are undoubtedly your top priority, but there's an important reason this section comes after taking care of your own financial security.

It's crucial to ensure your finances are stable first because your wellbeing directly affects their future.

Think of it this way: securing your own financial base is essential – otherwise, you might become financially reliant on your children later, turning the tables in a way you probably don't want. You'd be giving them a head start only to handicap them later in life if you can't pay for your own care.

So first, establish your own solid financial footing, before turning your focus to supporting theirs.

In the UK, you have two excellent tools at your disposal for investing in your children's financial future: a Junior SIPP and a Junior ISA.

A Junior SIPP (Self-Invested Personal Pension) can be an extraordinary financial gift for your child, offering significant long-term benefits through compound interest. Essentially, it's a pension they can access at retirement age, giving decades of growth potential.

For instance, if you invest £5,000 in a Junior SIPP when your child is born and place it in a well-performing fund, by age 60 that single amount could grow to approximately £1.08 million, assuming a consistent 9% annual return after fees.

If that seems daunting, even just £10 a month contributed consistently can build up to around £300,000 over the same period – a substantial amount that could support their retirement.

Then again, if your child's retirement feels about as distant as a cryogenically preserved Elon Musk finally setting foot on Mars, you might want to aim for something a bit closer – like a pot to help them get a strong start in adulthood.

A junior ISA works like a standard ISA but transfers ownership to your child when they turn 18.

This makes it perfect for early-adulthood goals, like getting a car, paying for a deposit on their first home, or even funding an adventure to find themselves at a Full Moon Party in Thailand – basically a chance to enjoy the money while they're still young (and dumb...).

With a contribution limit of up to £9,000 per year, even modest, regular contributions – say £50 a month from you and occasional gifts from family – can grow into a helpful sum by the time they reach adulthood.

If you're fortunate enough to be dealing with larger sums (£500,000 to £1 million and upwards in investable assets, excluding you primary residence), you might also consider advanced options like Family Investment Companies or Discretionary Trusts.

Typically set up with help from a financial advisor, solicitor, or accountant, these tools give you greater control over how wealth passes down the generations, allowing you to manage inheritance carefully, reduce your estate's inheritance tax bill, and keep your money from falling into inexperienced hands all at once.

They're not about dodging tax altogether – just about handling inheritance more efficiently (and cautiously). Think of these as the financial equivalent of stabilisers on your children's inheritance: giving them freedom to move forward but ensuring they don't crash your hard-earned wealth into a ditch.

We've got a whole video dedicated to investing for kids over on our YouTube channel. You can check it out below:

12) Rolling the dice

Are you feeling lucky, punk? As Clint Eastwood famously growled in Dirty Harry, it’s all well and good to take a shot – but only when you know the gun isn’t pointed at your own foot.

Before you punt your hard-earned cash on the latest meme coin pumped by Jake Paul or the president of Argentina, make sure your financial ducks are in a row.

That means you've maxed out your pension match, stashed a solid emergency fund, and have most of your investments in something predictably dull but effective.

Then, and only then – if you're looking to be really sensible – should you look to more speculative investments that could risk a lot of your cash if things go south.

If you're looking for high-risk, high-reward investments with tax perks, you could consider Venture Capital Trusts (VCTs), Enterprise Investment Schemes (EIS), and Seed Enterprise Investment Schemes (SEIS). These let you back young, promising businesses, offering generous tax relief as compensation for the risk that more than half of them will likely go bust within a few years.

VCTs offer immediate diversification (your money is spread across multiple start-ups), whereas EIS and SEIS involve investing directly in individual companies – risky, but potentially rewarding if you know your stuff, or have luck on your side.

Remember though, there's no reason to say you have to be speculative at all.

Speculation is optional – like dessert after a massive Sunday roast. We've really included this at the end of our list to say: heavily consider doing all the other stuff before taking huge gambles.

Final thoughts

This guide isn’t financial advice – and we're not just saying that because we don’t want you suing us. The truth is, the perfect order for investing will look different for everyone. 

If you’re a mature student switching careers at 40, “investing in yourself” might shoot to the top of the list. 

If you're self-employed, there’s no employer match to grab, so a SIPP might take priority instead. 

The key is to think about your situation, weigh up your options, and build a ranking that actually works for you.

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