Your home and your pension are likely to be two of the most substantial investments you’ll hold in your lifetime. And if you’re lucky enough to have already bought a home, or are almost there, it could be a good time to start thinking about saving for life after work.
Whether you want to stop working altogether or plan to continue to work in some capacity, you’ll need to have some money put aside. Many people use the Lifetime ISA (LISA) to buy their first home, but you can also use it to save for later life and get the same 25% government bonus on your savings – only this time it will go towards your retirement fund.
Shouldn’t I save into a pension for retirement?
Saving into a workplace pension should be your first port of call for your retirement pot since you’ll benefit from employer contributions – it’s free money for your pension after all. If you have maxed out your workplace pension contributions, or don't pay into a workplace pension at all (maybe you are self-employed), the LISA could be a good option for your retirement savings.
What are the main differences between a Lifetime ISA and a personal pension for retirement?
The two accounts are similar in many ways 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 LISA is the other way around: you contribute money you’ve already paid tax on (and receive a bonus on those contributions - 25%) but eligible withdrawals are tax-free. With a LISA, you’ll get tax-free withdrawals when you buy your first home and/or when you hit age 60.
Can I have a LISA and a personal pension?
Yes! You absolutely can use both a Moneybox LISA and Moneybox Pension to save for retirement. You should consider your personal circumstances and the relevant pros and cons offered by each type of account – for example, withdrawal age, different tax treatment for withdrawals, impact on government means tested benefits, death benefits, and potential different tax relief rates on your contributions – but for some individuals, the combination could be seen as the ultimate retirement solution. By using both accounts you’ll have access to the benefits each account has to offer.
Tell me about the Moneybox Lifetime ISA
The LISA is designed by the government to help people aged 18-39 buy their first home or save for retirement.
You can save or invest up to £4,000 into your LISA per tax year (up to the age of 50 – first payment must be made before age of 40 to open a LISA) and the government will top up your account with a 25% bonus. So if you save £4,000, that’s £1,000 on top every year – completely free!
Moneybox offers two types of LISA: a Cash Lifetime ISA (for shorter term goals) or invest into a Stocks and Shares Lifetime ISA (for long-term goals, such as retirement).
Tell me about the Moneybox Pension
A personal pension, or SIPP, can be a great way to build a healthy retirement pot. With Moneybox you can:
See exactly how much money you have towards retirement, alongside your other saving and investing accounts
Benefit from tax relief on your contributions in the form of 25% top-ups
Easily find and combine old workplace pension pots into one personal pension
Choose where your money is invested, to align with your values
Explore the Moneybox Personal Pension
If you’re not sure whether these Moneybox products are right for you, a suitably qualified financial adviser can help you decide.
A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.
Tax treatment depends on individual circumstances and is subject to change.