What’s better, a workplace pension or a Lifetime ISA?

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

For most people, a workplace pension where an employer offers a matching contribution is likely to be better. There are some ‘soft’ benefits of a Lifetime ISA (LISA), for example the availability of early access with penalties, but looking at the tax position, the options speak for themselves.

LISAPension (BRT)Pension (HRT)Pension + Matching (BRT)Pension + Matching (HRT)
Tax relief10001000200010002000
Employer matching50006000
Tax free allowance (at 55)1250150025003000
Tax free allowance (at 60)5000
Taxable assuming BRT in retirement3000360060007200

Key: BRT/HRT – basic or higher rate taxpayer; all figures / £

The nature of this analysis is simplified, so I have ignored growth and assumed that even a higher rate taxpayer will be a basic rate taxpayer in retirement; we find this is commonly the case but care should be taken not to take the general summary above to apply to your own situation.

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