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A Stocks and Shares ISA can play a central role in achieving early retirement. It offers tax-free growth and flexibility long before the State Pension age. In the UK, that age currently stands at 66 and is set to rise to 67 by 2028.
The full new State Pension pays £221.20 a week in 2025, equivalent to around £11,500 a year — a useful base income but rarely enough to retire comfortably on its own.
Private or workplace pensions can typically be accessed from age 55 (rising to 57 in 2028), though withdrawals are taxed as income.
An ISA however, can be accessed at any age and without tax on gains or withdrawals. That flexibility makes it ideal for bridging the gap between leaving work and drawing a pension.
With a £20,000 annual allowance, disciplined investors can build a substantial pot over time through diversified equity funds or individual shares.
Assuming consistent contributions and long-term market returns, an ISA could generate the income required to retire several years before pension access age — or even decades earlier, depending on lifestyle goals and investment performance.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Running the maths
Today, it’s largely considered that someone would need a £30,000 retirement income to live comfortably. That’s £18,500 more than the current State Pension.
Typically, we apply a 4% withdrawal rule for pensions. This means a private pension pot would need to have around £462,500 in it to deliver that £18,500 annually, and collectively provide the pensioner with £30,000.
However, a Stocks and Shares ISA is typically something we’d run in addition to any workplace pension or Self-Invested Personal Pension (SIPP).
Now, there are plenty of ways to run the maths. A £600,000 ISA with a 5% withdrawal (we can be bolder outside a pension) would deliver a £30,000 tax-free income.
Reaching £600,000 in an ISA would take 27 years, assuming an average 8% return and £500 of monthly contributions.
And, of course, inflation would need to be factored in. I’d actually need around £1m-£1.15m, depending on inflation, to have the same purchasing power as £30,000 today.
Where to invest?
The question everyone asks is where to invest? And there’s never a straightforward answer. More passive investors may wish to elect for funds, trusts and bonds (government or company debt). More active investors may wish for a greater share of stocks (positions in companies).
One of my favourite stocks at this moment is Jet2 (LSE:JET2). I believe it’s worth considering largely because of the valuation proposition — the starting point for all investments.
It’s trading at 6.7 times forward earnings but 75% of the valuation is covered by net cash — including customer deposits. As such, the enterprise value-to-EBITDA ratio is just 0.83, a lot less than its peers.
The company’s also undertaking a fleet overhaul programme that will see older aircraft replaced by Airbus A320neo and A321neo models. What’s more, it appears to being done in a very sustainable manner.
But no company’s perfect. Its earnings estimates have been revised down for 2028. And part of that can be attributed to a later booking pattern. As a result, Jet2 has reduced expected capacity for the winter period. Higher employment costs are also a contributing factor.
