Retirement Planning

Pensions are typically more tax-efficient for higher and additional-rate taxpayers and for employees with generous workplace schemes, whereas LISAs can suit basic-rate taxpayers, the self-employed and those who value flexibility and tax-free access from age 60.

Accounts can be opened by UK residents aged 18 to 39, with bonuses paid monthly until the holder turns 50. Funds can be used to buy a first home worth up to £450,000 or accessed from age 60 for retirement.

Strategies must respect the £4,000 annual cap, the £450,000 property limit and the 25%Withdrawalcharge.

Other withdrawals attract a 25% HMRC charge, which removes the bonus and an additional slice of the saver's own money.

Many pensioners therefore need extra income from workplace pensions, savings,Earningsor means-tested benefits to live independently.

While the £4,000 annual cap limits how much can be saved each year, the LISA can complement a pension by providing a separate, fully tax-free pot to use alongside taxable pension income in retirement.

Common rules of thumb include the 'half your age' rule (contribute a percentage of salary equal to half your age when you start) and target replacement ratios such as those used in the PLSA Retirement Living Standards.