LISA vs SIPP: When the Lifetime ISA Wins
Every UK forum tells basic rate taxpayers to use a SIPP. The maths the forums skip says otherwise for a specific group of savers, and the LISA quietly wins by thousands.
£80 in: what reaches you at withdrawal
| Wrapper | After top-up | Tax-free portion | Net to you |
|---|---|---|---|
| SIPP (basic-rate in retirement) | £100 | 25% (£25) | £85 |
| LISA (age 60+) | £100 | 100% (£100) | £100 |
| Non-earner pension (capped £2,880) | £3,600 | 25% tax-free | Most taxed |
| Non-earner LISA (full £4,000) | £5,000 | 100% at 60 | £5,000 |
For a basic-rate saver with no employer match, the LISA's exit treatment beats the SIPP.
Key takeaways
For a basic rate taxpayer with no employer match, a LISA often returns more pound-for-pound than a SIPP, because the 25% bonus matches basic rate relief and withdrawals are fully tax-free.
A non-earning partner can only get pension relief on £2,880 a year. The LISA lets them shelter up to £4,000 with a £1,000 bonus, which is the better deal under 40.
LISA money is useful in drawdown for keeping taxable income below thresholds, since the withdrawal does not eat into the personal allowance.
The SIPP still wins for higher rate taxpayers, anyone with an employer match, and anyone who needs access between 55 and 60.