Two investment decisions you shouldn’t delay

As markets swing wildly, drunk on the prospect of an early end to a careless war, investors have two decisions to make before the weekend. First, whether to use any unused ISA or pension allowance before the tax year expires on Easter Sunday. Second, if they do top up those tax-free accounts, what they should do with the money they contribute. The first question is easier than the second.

• Get updates on markets, ISA funds, pension saving and much more

There are few ways left to legally avoid paying tax these days. And once the capture of our pensions in the inheritance tax net begins next April, there will be one fewer. For now, though, both individual savings accounts (ISAs) and pensions (both workplace and self-invested SIPPs) have generous annual allowances. It is hard to think why you would not use them as much as you can.

• Find out more about our Stocks and Shares ISA

You and your spouse can both pay up to £20,000 a year into an ISA. Assuming your contributions are matched by earnings, you can also pay up to £60,000 a year into a pension. You must use your ISA allowance before midnight on 5 April, or you lose it. But you can carry forward up to three years of pension contributions. If, like me, you are in the max-it-out, pre-retirement phase, there is a gratifying amount you can tax-efficiently stuff away.

There are good reasons to do so. Money in both wrappers will grow free of income and capital gains tax. With your ISA, you don’t even have to tell the tax man what you have got. With your personal pension, you get an automatic top up of the basic rate, and you can claim back any higher or additional rate tax through your tax return.

Do it via your workplace pension, with salary sacrifice, and you can avoid national insurance too. So will your employer and, if you are lucky, they may share some of the benefit with you. It is basically free money. If you earn just above the punitive thresholds in our un-progressive tax system, you might even find paying into a pension reduces your overall tax rate.

If you are reading this column, I suspect you already know this, so I won’t labour the point. My recommendation would be to just do it. You can thank me later.

• Find out more about our Self-Invested Personal Pension (SIPP)

Now the more difficult question. What to do with the money you’ve paid in?

There are two ways of looking at this. Again, one is easier than the other. The simpler question is whether, assuming you can still take a long-term view, you should be invested in the stock market. And the answer is - with the usual caveat about personal circumstances - most likely yes.

I recently annotated a 50-year chart of the global stock market with many of the unpleasant things that have happened in the world over the past half century. It was not hard to see the impact of the bursting of the dot.com bubble and the financial crisis. For everything else - from Yom Kippur to the fall of Saigon, from the Iranian revolution to the 1987 crash, from Brexit to Covid and Ukraine - you need a magnifying glass to see the impact on your investments.

If you do not need your money for a few years, the superior returns from the stock market make this a simple decision.

• Get £300 to £3,000 cashback when you add a lump sum or transfer into our SIPP or ISA by 5 April 2026. Min value, exclusions and T&Cs apply.

Which leaves the question of what is going to happen to your money in the short run? This is trickier. In a trillion-dollar version of what we are all asking ourselves this week, the markets are flip-flopping between worrying about the impact of conflict in the Gulf on inflation and growth and remembering how profitable it was to buy the dip last year.

Fear of missing out on the rally that we duly saw begin this week prevented the proper sell-off that events might have justified. It is a fragile equilibrium, but it is holding for now, helped by still buoyant earnings expectations.

We got a glimpse of what might destabilise it this week when, for no very good reason, investors stopped worrying about the thing they’ve been focused on for the last four weeks - inflation - and started considering the thing they’ve been pushing to the back of their minds - growth, or rather its absence. Bonds stopped fretting about price rises and got concerned instead about recession.

We have a good template for an energy crisis that began as an inflation shock and over time morphed into a growth scare. Between March and October 1974, the US stock market fell by 40% as the Arab oil embargo first quadrupled the price of oil and then triggered a deep and painful recession.

The important lesson for investors today is that for six months after the short Yom Kippur war in October 1973, stock markets acted just how they have in the past four weeks. They fell, but modestly. Ironically, it was only after the embargo was lifted in the spring of 1974 that the full economic impact was felt, and stock markets declined more sharply. That remains a possibility even if the US withdraws and leaves others to clear up the mess.

So, what does this mean for investors weighing up their options in this last week of the financial year, as the clock ticks on their annual tax-free investment allowances? It means two things. First, the case for locking in the tax benefits of an ISA and pension is unchanged. If you can, you should. But second, it argues for caution and patience when it comes to deploying that money into the market.

I will be using up my allowances before Sunday night, including pension carry forward. But then I will drip the money into the market in increments over the next year. If the war ends quickly, and the relief rally takes hold, I may miss out. But if the echoes are more 1974 than 2025, I will be glad I took my time.

This article was originally published in The Telegraph.

Got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

• Read: ISA ideas: low cost index tracker fund options 
• Read: Top 10 best-selling ETFs of 2026
• Read: IHT problem? Try combining these perks

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Overseas investments will be affected by movements in currency exchange rates. Tax treatment depends on individual circumstances, and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.