Free calculator
Lifetime ISA vs SIPP: the same saving, compared.
For the same out-of-pocket saving each year, this compares a Lifetime ISA (25% government bonus, tax-free from 60) with a SIPP under relief at source (tax relief going in, 25% tax-free then taxed income coming out, from age 57). Every figure is computed by the same deterministic tax engine used across EnoughDay, not a recommendation.
Side by side at age 60
£4,000 a year from age 30 to 50 (20 years, £80,000 saved in total), then 10 growth-only years to 60.
Post-tax gap
£40,396
in favour of the LISA here
| Lifetime ISA | SIPP (relief at source) | |
|---|---|---|
| Invested each year | £5,000incl. £1,000 bonus | £5,000gross, after all relief |
| Pot at 60 | £269,305 | £269,305 |
| Tax on the way out | £0 | £40,396after £67,326 tax-free cash |
| Post-tax spendable value | £269,305 | £228,909 |
| Per £1 saved out of pocket | £3.37 | £2.86 |
Why the tax rates decide it
Both wrappers turn £1 of basic-rate saving into £1.25 invested — the LISA through the government bonus, the SIPP through relief at source. The difference is the way out: LISA withdrawals from 60 are entirely tax-free, while only 25% of a pension is tax-free and the rest is taxed as income.
That is why the crossover follows the two tax rates. Relief at 40% or 45% going in with basic-rate (or 0%) tax coming out leaves the SIPP ahead; the same rate in and out — including basic-in, basic-out — leaves the LISA ahead or level. Growth applies to both pots equally, so it moves the pound gap but not the winner for a given pair of rates.
Keep these figures
EnoughDay will carry only the fields this calculator identifies. You will review wrapper totals before the plan can be saved.
- Age now
- Annual saving remains unallocated until you choose wrappers
Per £1 saved out of pocket, before growth: a Lifetime ISA returns £1.25 tax-free at 60. A SIPP returns £1.06 after tax for a basic-rate contributor drawing at basic rate — and £1.42 for a higher-rate contributor drawing at basic rate. Computed with the same deterministic engine as the calculator above.
How the rules differ
| Lifetime ISA | SIPP (relief at source) | |
|---|---|---|
| Opening the account | First payment between age 18 and 39. | No LISA-style opening window; contributions attract relief on up to 100% of relevant earnings (minimum £3,600 gross for non-earners). |
| Money going in | 25% government bonus on up to £4,000 a year (maximum £1,000 bonus), inside the £20,000 overall ISA allowance. Contributions and bonus stop at 50. | Tax relief at the contributor's marginal rate: basic 20% added in the fund by the provider, higher/additional relief reclaimed via Self Assessment. £60,000 annual allowance (gross, including employer money). |
| Access age | Charge-free from 60, or earlier for a qualifying first home up to £450,000. | Normal minimum pension age: 55 now, 57 from 6 April 2028. |
| Early / flexible access | Any other withdrawal at any age is possible but incurs the 25% charge (a net loss of about 6.25% of the saver's own money). | Not normally accessible before pension age at all; after it, withdrawals are flexible but taxed. |
| Tax coming out | Nothing — qualifying withdrawals are entirely tax-free. | 25% tax-free (within the £268,275 lump sum allowance); the rest is taxed as income at the marginal rate when drawn. |
| Inheritance tax from April 2027 | Already part of the estate (no change in 2027). | Unused pension funds join the estate for deaths from 6 April 2027 (Finance Act 2026); death at 75+ also leaves beneficiaries paying income tax on withdrawals. |
Worked example
A 30-year-old saves £4,000 a year out of pocket until 50 (£80,000 in total) with 5% annual growth. In the LISA, each year becomes £5,000 invested with the bonus; in the SIPP with basic-rate relief, the same money also becomes £5,000 gross. Both pots reach £269,305 at 60.
The LISA pot is spendable in full: £269,305. Drawing the SIPP at basic rate leaves £67,326 tax-free cash plus the taxed remainder — £228,909 spendable, a gap of £40,396 in the LISA's favour for basic-in, basic-out.
The same saver on higher-rate earnings flips the result: 40% relief makes the gross contribution £6,667 a year, the SIPP pot reaches £359,073, and after basic-rate tax on the way out it is worth £305,212 — now £35,907 ahead of the unchanged LISA figure.
How this is calculated
Both legs run through the same deterministic tax engine used across EnoughDay, with money held in integer pence at the compute boundary. The full method, sources and known simplifications are on the methodology page.
Contributions are level annual amounts from the current age to 50 — the LISA contribution cutoff — applied to both wrappers so the out-of-pocket cost is identical. Both pots then grow untouched to 60, the LISA's charge-free access age, and are valued at that single point. The SIPP itself is accessible from 57 (for anyone reaching pension age after 6 April 2028); the rules table above covers the access-age difference.
The LISA leg adds the 25% bonus to each year's payment up to the £4,000 limit; saving above the limit continues bonus-free with ordinary stocks & shares ISA treatment. The SIPP leg grosses the out-of-pocket amount up by the selected marginal rate — basic relief added in the fund, higher/additional relief reclaimed via Self Assessment and treated as reducing the out-of-pocket cost. On withdrawal, 25% is tax-free within the £268,275 lump sum allowance and the remainder is taxed at the selected retirement marginal rate.
Simplifications: the whole pension is treated as crystallised at 60 with one marginal rate on the taxable portion (real drawdown spreads across years and allowances); no employer contributions or salary sacrifice, which change the pension side materially; the annual-allowance charge and the LISA first-home route are flagged or described but not modelled. Growth is a planning assumption applied equally to both pots, not a forecast.
FAQ
Is a Lifetime ISA or a SIPP better for retirement saving?
Neither wins in every case — the comparison turns on the tax rate while contributing versus the tax rate in retirement. Per £1 saved out of pocket with no growth, a LISA returns £1.25 tax-free at 60. A SIPP returns about £1.06 after tax for a basic-rate contributor who also pays basic rate in retirement, but about £1.42 for a higher-rate contributor who retires into basic rate. This calculator shows the two figures side by side for any combination.
How does the 25% LISA bonus compare with pension tax relief?
For basic-rate money they are the same going in: £1 of out-of-pocket saving becomes £1.25 invested in both wrappers, because a 25% bonus and 20% relief at source are the same arithmetic. The difference appears at higher rates — pension relief rises to the saver's marginal rate (40% or 45%, with the extra reclaimed through Self Assessment), while the LISA bonus stays at 25% regardless of tax band — and on the way out, where LISA withdrawals are tax-free but 75% of a pension is taxed as income.
When can Lifetime ISA and SIPP money be taken out?
LISA money comes out charge-free from age 60, or earlier for a first home costing up to £450,000. SIPP money is accessible from the normal minimum pension age: 55 now, rising to 57 on 6 April 2028, which covers everyone in this calculator's 18–39 age range. So the SIPP is accessible about three years earlier, while the LISA is locked harder before 60.
What is the Lifetime ISA withdrawal charge?
Withdrawals that are not for a qualifying first home, age 60+, or terminal illness incur a 25% government charge on the amount withdrawn. Because the charge applies to the whole withdrawal — original saving plus bonus and growth — it takes back more than the bonus: £100 saved becomes £125 with the bonus, and a charged withdrawal of £125 loses £31.25, returning £93.75, about 6.25% less than the saver put in.
How much of a SIPP is tax-free on withdrawal?
Normally 25%, capped by the £268,275 lump sum allowance. The remaining 75% is taxed as income at the marginal rate in the year it is drawn. This calculator applies a single chosen retirement marginal rate to that taxable portion; in practice withdrawals spread across years can fall partly inside the personal allowance and lower bands.
Do a Lifetime ISA and a SIPP differ for inheritance tax?
ISA and LISA money has always counted as part of the estate for Inheritance Tax. Pensions historically sat outside the estate, but unused pension funds join the estate for deaths from 6 April 2027 under Finance Act 2026 — the same rules the EnoughDay engine models. From that date the two wrappers are far closer for IHT, though pension death benefits still interact with income tax for beneficiaries when death occurs at 75 or later.
Does the £4,000 Lifetime ISA limit include the government bonus?
No. The £4,000 annual limit applies to the saver's own payments; the 25% bonus (up to £1,000 a year) is added on top, so a full year's LISA can receive £5,000. The £4,000 does count within the overall £20,000 annual ISA allowance shared across all ISAs.