Both are tax-advantaged. Both make sense to use. The question is the order — and the answer is almost always the same for most people starting out.
If your employer matches pension contributions, capture the full match before doing anything else. A 5% employee contribution matched by 3% from your employer is an immediate 60% return on your money. Nothing else comes close. Once you've got the full match, the decision becomes more nuanced.
Money in a Stocks and Shares ISA grows free of tax and you can withdraw it at any age without penalty. No income tax, no capital gains tax, no lock-in. For money you might need before retirement, an ISA is the right wrapper.
Contributions attract tax relief immediately. As a basic rate taxpayer, every £80 you contribute becomes £100 in the pension (HMRC adds £20). Higher rate taxpayers can claim additional relief through self-assessment. For money you definitely won't need until at least age 57, the upfront tax relief makes pensions extremely efficient.
1. Contribute enough to the pension to get full employer matching. 2. Fill the ISA allowance with what's left. 3. Once the ISA is full or you're confident the money is genuinely for retirement, increase pension contributions further.
If you're unsure whether your pension investments are in a sensible fund, look at the default option. Many workplace pension defaults sit in cautious or lifestyle funds that shift toward bonds too early. If you're under 50, a higher equity allocation usually makes more sense.