Should I consider a personal pension or a Lifetime ISA?
A Pension or an ISA can both be used to save for retirement but have important differences, including when you pay income tax.
Your contributions into a pension aren’t taxed, but you pay tax on the money you withdraw from it during retirement. A Lifetime ISA is the other way around: you contribute money you’ve already paid tax on, but eligible withdrawals are tax-free.
For most people, it makes sense to pay into a personal pension rather than a Lifetime ISA, but this depends on tax rates or the age when you want to access your investments. A Lifetime ISA could be relevant if you’re self-employed, earning less than £10,000 from a single employer, not working, or if you expect to pay a higher tax rate in retirement than you do in work – this will depend on your individual circumstances, so you’ll need to assess the benefits of a pension or ISA or seek independent financial advice.
For more information on Lifetime ISAs, see: Guide to lifetime ISAs.