Pension vs ISA vs LISA - How much will each add up to?

Today I want to revisit some work I did a while ago comparing pensions with ISAs and Lifetime ISAs here in the UK.

We’re going to look at how these accounts work, how you contribute to them, how they grow, what sort of fund sizes are possible, the impact of inflation, then I’m going to help you with how to balance your savings between these important accounts.

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CHAPTERS:

00:00 Welcome
00:34 How the accounts work - Pension
03:11 How the accounts work - ISA
04:12 How the accounts work - Lifetime ISA
05:32 Outcome figures for the different accounts
08:25 Comments on the figures
10:15 Applying this to your situation

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📫 Leave me a comment below - I read all of them and love hearing from you!

[FradAnner]

I've digested a plethora of personal finance oriented channels here on Youtube over the years and the only two that I can still stomach are you and Erin. You give the very best and spot on advice and ask thought provoking and unbiased questions that help listeners like myself become better. More importantly, thank you for recommending Stephanie Janis Stiefel my investment portfolio with her has been quite sustaining

[alexandravieira]

hi Pete. About a year ago or so, I found your videos and even though i'm some 20 years away from retirement, it made me start thinking about my own personal finances. Thanks to you I've realised the importance of thinking about my finances and planning my financial future. Your videos help me make informed decisions on where to invest hassle-free and somewhat safely and cheaply (index funds all the way).
Thanks to your videos i've grown curious about the subject and looked for more material online, found other personal finance youtubers (the holy trinitiy of Pete, Damian and James Shack) and resources.
I've started making a budget and seriously planning my savings and retirement. I'm planning on retiring at 60 with a comfortable sum if all goes conservatively well.
You've made a serious positive contribution to my life, thank you so much for your channel and keep up the great work.

[ConradsViveiroses]

I usually look up your videos for updates! Our government has no idea how people are suffering these days. I feel for people with disabilities not getting the help they deserve. Thank you PAP, imagine investing $102, 000 and received $755, 500 within three months.

[annamuja]

Thanks to you I have joined work pension scheme. Thank you.

[mylesmears]

Your videos are really useful and I appreciate the time and effort you put into helping people. Every time I review my pension and investments, I can hear your voice saying 'be intentional' and 'the value of small increases'. Simple concepts perhaps, but the way you explain them and show the benefits is perfect. I can already see a significant difference since I found your channel a few years ago, so a huge thank you from me. I know what I'm aiming for and more importantly you've shown me how to get there.

[mattjames]

1st workplace pension (DB scheme)
2nd income over £50270 into a SIPP
3rd max out LISA until age 50
4th ISA - contribute alongside LISA

That's my plan

[joep]

Hi Pete. I hope you're keeping well. I've been watching your videos for some time now. In short, they are excellent. You keep what many think is a boring topic super interesting. You are a natural in from of the camera by the way. Keep up the great work. I look forward to your next video. Thanks. Joe

[floydchusset]

I've lived in America and Canada. Paid about the same in taxes but get way more for my taxes in Canada. Most Americans hate the government (hate giving them their money even more) because they've never experienced good governance.

[ellea]

Thanks, Pete. These kinds of videos always emphasise to me what an excellent teacher you are. I watched this through the lens of the money-ignorant person I was 10 years ago and I believe I would have understood this, given the simple way you explained it!

I have a small NHS DB pension, a SIPP and a S&S ISA. I'm going to open a LISA in April. In my head, I'm seeing it as:

ISA - early retirement bridge account or an 'in case I get too ill to work' account to get me through my 40s and 50s. It would also be used to pay off my remaining mortgage at age 50.

LISA - my 60-65 cash ladder, especially given the growing possibility that 65 could end up being the new SIPP and DB pension access age by that point!

SIPP and DB pension, with small ISA/LISA top-ups to reduce taxation - 65 onwards

State pension - Bonus money to start piling up towards any care costs or having a cleaner, cook etc in old age.

[eternaltboy]

The LISA (stocks and shares version) is great if you are a stay at home parent who also wants to save for retirement as alongside a SIPP (which for those not in paid employment is limited as you can only save upto £2880 per year and still get tax relief), the ability to save an "extra" £4000 (£5000 with bonus) in your LISA, means you can build up a retirement pot of your own rather than relying solely on a employed partner's.

[mickinmerton]

Great video. I look forward to the next as I have already retired with a pot which I'm drawing down from at about 3% pa.

[benjaminsalter]

Looking forward to your video after 30th October!

[lavayuki]

This was so useful! I have a LISA but will be emptying that for my first house this year, a cash ISA and my workplace NHS pension. I am looking at starting a SIPP and stocks and shares ISA but unsure

[DanRobards]

Super helpful to have everything visualised like this. Cheers Pete!

[tia]

Fantastic video, thank you. I was trying to do the comparisons myself. I pay into a public sector pension and have a lifetime ISA too, I can't quite afford to max this out yet but hopefully I can eventually.

[jonhdoe]

Hi Pete, I'm a huge fan of your videos! I'd love to see a video on your predictions for the October budget. What changes do you think are most likely to happen?

[soundslight]

For people working through their own LTD companies, typically one man companies for IT consultants etc, higher pension contributions result in lower income hence saving on NIC (employer + employee) = 23.8%

[chromebaby]

Yes, I do a pension/ISA split and it’s very heavily weighted towards my pension. 90/10 I’d say.

[Leeandemma]

As a company director and wanting to possibly wind down/semi-retire or possibly fully retire at age 55, I decided years ago to use only the S&S ISA.

My reasoning is, I want the tax free life when older and not having to manage income tax etc on my money.

I also think the retirement withdrawal age, which is 55, will be at 60 before I get to it.
They are already moving it to 57, which is later than I want access.

I invest £20, 000 per year into my Vanguard account mainly into the S&P 500, I am age 36 at the moment.

I am debt free.

Love your videos and they keep me convinced I am on the right path.

[workinprogresssince]

I thought that the caveat with the LISA was that the value of the house you can purchase with it has a cap on it, and given how house prices have rocketed in the last few years, it's getting harder and harder to find a house within that price band, especially if you live in the south of the country.