Pension vs ISA vs LISA - Where To Put Your Money?

One of the most common questions is which of the tax advantaged accounts in the UK should you put your money into.

Should you put as much as possible into your pension? Make as much use out of the annual £20,000 ISA allowance and should you use Lifetime ISAs?

In this video I will give my view on this question and highlight some important things to be aware of with these different types of investing/saving accounts.

My perspective on these is going to be skewed by the fact that I am young and have a high risk tolerance so please make sure you do treat this as what it is - my opinion.

I am also very comfortable with investing money which some people are not and this may also affect your decisions in this context.

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[SashaYanshin]

Forgot the "Under The Mattress Option"!
YOU CAN SET UP A STOCKS & SHARES ISA AND A SIPP ACCOUNT WITH FREETRADE
GET A FREE SHARE WORTH UP TO £200 WHILE YOU'RE AT IT
You need to sign up and make any deposit to get the free share. I will get a free share as well.

[andyscott]

Sasha can you do a video on wheres best to hold your emergency fund - I've been looking at premium bonds as they seem to pay the most for accessible cash. Your thoughts would be interesting

[tom]

LISA is brilliant for first time buyers. Both my partner and I opened Help to Buy ISAs the day they opened then transferred them to LISAs when they opened. Over about 4 years we made over 8/9k as we were allowed to claim 25% on everything we had already saved in the H2B.

[goldi]

Yes yes Mr Sasha is looking smart latley 😎🔥😂

[JagOnline]

Had to switch up to the shirt for this one

[AbiChow]

LISAs are great but it's a shame they have such low interest (esp these days) and the restrictions are a bit much. I'm happy they lifted the restrictions for this tax year so I could test it out to see if I wanted to use it for buying a house or retirement. But right now I think I'll be sticking to a SIPP and S&S ISA.

[adp]

I currently pay everything over 40% threshold into my pension, then max out my LISA so in effect paying less than 20% tax, the remainder goes in to S&S ISA. Is there a way to be more tax efficient in the long run?

[birdsaloud]

Thank you. I keep hearing about the American and British and European governments printing silly money and flooding the economy with it. This will lead to inflation and so our savings will depreciate in value. Many folks are predicting a subsequent economic crash sometime in the near future as all the debt world leaders/banks have accrued is unsustainable. Britain is 1.3 trillion pounds in debt! My question is, if there is an economic crash, how can we prepare?

[denisskaibagarovs]

Could you please do a video on Vanguard if you ever worked with that platform. (ideally, if you could compare it to 212)

[BIGhats]

I love the LISA, even if the interest rate is 0%. But now I think about how it works, it’s essentially just a tax-back service with extra steps 😂

[Medazzalad]

Firstly, immense thanks for your exceptionally informative series: so loaded with second-to-second superb insights!

I've been wondering about the strategy of 'Maxing-out' on ISAs - whether it would be just as well do so, year after year, as to buy long-term shares on a typical basis?

Noted: there's "no downside" and beyond ISA's there's currently a 12k allowance for capital gains... so are there any straightforward 'upsides' when playing long-term and having to push towards putting 20k away?

[paulhayes]

I'm 19 and I'm paying £100 into my Lisa every month which is invested in different ETFs. I don't know if it's a good because of my age but should be enough for a downpayment on a house (especially if the 5% downpayments are coming back)

[KittyMeowWow]

So you don't think you should try and add the max to the LISA to get the gov contribution? I'm in my early 40s and have a home, so I don't need it for that. I do have a pension now and am in the higher tax bracket, so feel I should make use of that extra 20% tax break? I also have some money in the S&P 500. Unsure what I should be putting most into at this point.

[samsungdiscx]

1. Have opened one ISA account in HSBC ( LOY_ISA_Adv) ( In OCT 2023) and deposited 20000.00 GBP and withdraw 5000.00 GBP in March 2024 .

2. I opened one more Cash ISA in NatWest in March 2023 and deposited 20000.00 GBP

3. Have opened in March 2024 one more ISA account ( march 2024) and deposited 20000.00 GBP and withdraw all amount in one day in Halifax .

Here my question is can i have any tax issues or penalties from HMRC as i have two ISA accounts with 20000.00 GBP amount in each account ?

Requesting for your kind advice

[finlayhague]

I am 19 and am thinking about starting my pension. I already have a LISA and an ISA. However if I use my LISA as my pension why would this not be better than a pension. I get 25% return guaranteed along with any growth on my investments. Yes I miss out on a 3% employee contribution and have to pay income tax on this amount but like you said all my gains are tax free unlike a pension which is only tax free on the first 25%.

[kennybother]

What makes you think LISA’s have low returns & high fees? Hargreaves Lansdown’s LISA fees are no different than for a S&S ISA and returns governed by your investments which is your choice....

[danielrance]

Hey I agree most LISA offer poor returns. But I opened one with aj bell that allows investment in stocks and shares. For far greater returns

[llionrob]

I agree that most LISA providers do offer high fees, but EQi offers a flat 0.2% fee, and allows you to invest in low cost funds which include vanguard funds. This to me seems like a better option than a SIPP for a basic rate taxpayer, as you're effectively reclaiming all of your tax (giving 25% is the same as not taxing 20% in the fist place). If you put your money into a SIPP you have to pay tax on most of your cash when you withdraw it in years to come, assuming you'll be withdrawing more than the tax free allowance. Interested in your thoughts?

[TiaanKruger]

Good breakdown, especially since I am looking at stuff like this at present.

What are your thoughts on using a part of your savings (in my case aiming for retirement) to invest in crypto.
I obviously know it is higher risk for higher reward, but just trying to find out what you think

[itsmesaltax]

I'm so long term that I see my ISA and Pension as equal investing tools. I'm 25 and very bullish on my pension, currently putting in 47% of my salary via salary sacrifice. I plan to FIRE as soon as I hit 57 or years before that in anticipation that I know I'll get a hefty lump sum to pay off every debt including home.