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- There are more than 1.2 million Lifetime ISA (LISA) accounts in the UK, with more than one million containing under £25,000* and 50 holding balances of £100,000 or over
- With the future of LISAs set to change, Standard Life analysis shows how investing the annual £4,000 LISA allowance into your pension could potentially increase retirement savings by £180,000 by age 68
The Government's planned reforms to remove the retirement-saving function of Lifetime ISAs (LISAs), expected to be replaced by a First-Time Buyer ISA (FTB ISA), have put their current role as a retirement savings vehicle firmly in the spotlight, creating a point to review their role for those who had been using, or considering, using them to save for later life. However, new analysis from Standard Life shows how investing the annual £4,000 LISA allowance into your pension instead could provide a more effective way to give your pension savings a £180k boost.
Initially designed to serve a dual purpose, across the UK, many savers have used LISAs to help save for a first home and for retirement, and a Freedom of Information1 request from Standard Life, a retirement specialist focused entirely on retirement savings and income, reveals there are over 1.2 million LISAs accounts held. The majority have balances of up to £25,000, while 50 accounts have grown to more than £100,000.
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Number of Lifetime ISAs in the UK: FOI request from Standard Life1
| Market value range | Number of Lifetime ISA accounts |
|
£0 - £24,999 £25,000 - £49,999 £50,000 - £74,999 £75,000 - £99,999 ££100,000+ |
1,177,940 54,610 1,440 80 50 |
However while many have been making use of the benefits offered through Lifetime ISAs, such as the 25% government bonus, for those thinking about later life, analysis shows how pensions will in many cases remain the more effective way to save for later life, providing tax relief in line with your income tax rate, as well as employer contributions which can make a substantial difference.
A £4,000 a year pension boost
Lifetime ISAs currently allow people to save up to £4,000 a year until their 50th birthday and receive a 25% Government bonus, with funds used either for a first home or later life. With the proposed changes expected to focus solely on first-time buyers through the proposed First-Time Buyer ISA (FTB ISA) those who had viewed or been using the product as a retirement planning tool may want to consider how maintaining a similar £4,000 annual contribution could boost their pension pot.
Standard Life analysis2 shows someone who starts working at age 22 on a salary of £25,000 and pays minimum auto-enrolment pension contributions of 5% employee and 3% employer could build a pension worth around £210,000 by age 68, after allowing for inflation. However, if that same individual added an additional £4,000 a year to their pension from age 22 until age 49 (the current Lifetime ISA contribution cut off), their retirement saving could potentially grow to around £390,000 by age 68 - approximately £180,000 more than those who only make the minimum auto-enrolment contributions.
Total retirement fund at age 68
| Minimum contributions (5% employee, 3% employer) from 22 years old | Minimum contributions from 22 years old, plus additional contributions of £4,000 per year until 50 |
|
£210,000
|
£390,000 +£180,000 |
*assuming 3.50% salary growth per year, and 5% a year investment growth. Figures account for 2% inflation. Annual Management Charge of 0.75% assumed. The figures are an illustration and are not guaranteed. £4,000 per year is the maximum you can contribute to a LISA, with 50 the cut off age for contributions.
Pension tax relief to help savings go further
While Lifetime ISAs currently offer a 25% Government bonus on contributions, pension contributions also benefit from tax relief - 20% for basic-rate taxpayers and 40% for higher-rate taxpayers - helping savers boost the amount invested for retirement.
Higher-rate taxpayers, for example, could either contribute £4,000 more efficiently (at a personal cost of just £2,400), or use the same £4,000 to make a much larger pension contribution worth £6,666:
| Scenario | Cost to you | Government top-up /Tax Relief | Total value in account |
|
LISA (flat 25% bonus) Pension – Basic Rate (20%) Pension – Higher Rate (40%) Pension - £4,000 net contribution for Basic Rate taxpayer Pension – £4,000 net contribution for Higher Rate taxpayer |
£4,000 £3,200 £2,400 £4,000
|
£1,000 (25%) £800 (20%) £1,600 (40%) £1,000 (20%)
|
£5,000 £4,000 £4,000 £5,000
|
Planning for retirement is a much longer-term journey, often spanning decades, and where investment growth plays a far bigger role, so there is a strong case for separating out these two goals as saving for a home and saving for retirement involve very different timeframes and investment considerations.
For those planning for retirement, pensions will in most cases remain the more effective way to saver for later life. While LISAs currently offer a 25% Government bonus, pensions benefit from tax relief is based on your income tax rate, meaning higher-rate taxpayers can receive a significantly greater boost. Early in your career, when you're more likely to be a basic-rate taxpayer, the difference between a Lifetime ISA bonus and pension tax relief may be less pronounced, but as earnings increase, pensions can become increasingly valuable as higher rates of tax relief become available. On top of that, employer contributions can make a substantial difference, which is something a Lifetime ISA can’t replicate.
As the savings landscape evolves, it’s important people understand what is changing, what isn’t, and the role that different savings mechanisms can play in helping people achieve greater financial security both in the short term and in later life. For those who may have been considering using a Lifetime ISA specifically for retirement, opening one ahead of future changes could offer an additional option, particularly for higher earners who may eventually approach pension contribution limits, however, for the vast majority of people, the priority should be making full use of their pension.
Media enquiries
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Cezary Grabski
Public Relations Consultant, Consumer financeTelephone:+44 (0)781 240 6077
Notes to editors:
1: Standard Life Freedom of Information request. The figures document the total number of Lifetime ISA accounts broken down by banded market values as of 5 April 2024 (the latest data available). The figures are rounded to the nearest ten. Data provided by HMRC.
2: *Calculations assume the following:
| Starting Salary | £25,000 |
|
Employer Contribution Employee Contribution Investment Growth Salary Growth Inflation Annual Investment Cost |
3.00% 5.00% 5.00% 3.50% 2.00% 0.75% |
Calculations are intended only for the sole purpose of providing an illustration regarding the projection of savings and pensions. They should not be used with the intention to give an accurate representation of real-world outcomes.
About Standard Life
Standard Life is a retirement specialist focused entirely on retirement saving and income.
We are proud to manage around c£317bn in assets on behalf of our 12 million customers, and we champion the belief that everyone's journey to and through retirement can be better.
With our focus entirely on retirement savings and income we want to be the business that people trust to guide their retirement journey, helping our customers achieve better outcomes and greater financial security in later life.
As a FTSE 100-listed group we are using our size, expertise and influence to shape the world our customers will retire into, and are committed to helping three million more customers by 2035, take action towards a better retirement.
Standard Life is a responsible investor with a clear commitment to supporting a more sustainable future. The Group has achieved its net zero goal across its emissions for 2025 and is working towards net zero investment portfolios by 2050 or sooner.
Standard Life is recognised as a leading employer, with long-standing accreditation as a Living Wage Employer, Living Pension Employer and Carer Positive Exemplary Employer and in 2025 became one of Britain’s Most Admired Companies in 2025.