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Alistair Cunningham
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.
| LISA | Pension (BRT) | Pension(HRT) | Pension + Matching (BRT) | Pension + Matching (HRT) | |
| Contribution | 4000 | 4000 | 4000 | 4000 | 4000 |
| Tax relief | 1000 | 1000 | 2000 | 1000 | 2000 |
| Employer matching | 5000 | 6000 | |||
| Tax free allowance (at 55) | 1250 | 1500 | 2500 | 3000 | |
| Tax free allowance (at 60) | 5000 | ||||
| Taxable assuming BRT in retirement | 3000 | 3600 | 6000 | 7200 | |
| Total | 5000 | 4250 | 5100 | 8500 | 10200 |
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.
