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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

Our resident expert looks at the best option for building up a pot to live on after you retire
Thursday 02 Dec 2021 Author: Tom Selby

I’m 35-years-old and, for various reasons, have only just got round to thinking about saving for retirement. I’m self-employed and my earnings tend to be between £30,000 and £45,000 per year. I’ve seen adverts for Lifetime ISAs and SIPPs and I’m considering setting up a regular savings plan.

Two questions:

Have I left it too late to save for retirement?

If not, then which of a Lifetime ISA and a pension would likely be most appropriate for me?


Tom Selby, AJ Bell Head of Retirement Policy says:

While it’s true that saving early and often is the easiest way to build up a decent-sized retirement pot, at 35 years old you still have time on your side.

Take for example someone who saves £3,000 a year in a pension – equivalent to a £250 monthly contribution.

Over 30 years assuming 4% annual investment growth after charges their fund could be worth £175,000.

This may not be enough to enjoy a comfortable retirement (remember if you’re healthy that money may need to stretch for 25 years or more), but it is a sizeable sum which is clearly significantly better than having nothing set aside at all.


Both Lifetime ISAs and SIPPS benefit from tax-free investment growth. The main differences are in how much of an upfront boost you get for locking your money away, what you can save each year and the tax you pay when you come to make withdrawals.

You can save up to £4,000 a year into a Lifetime ISA, with each £1 you subscribe up to this point topped up by a 25p Government bonus. You can then access your fund entirely tax-free in three circumstances:

- Reaching your 60th birthday

- Buying a first home worth £450,000 or less

- If you become terminally ill

However, if you need to access your money for any other reason a 25% Government-imposed early withdrawal penalty will apply, meaning you might get back less than you put in.

You can take out a Lifetime ISA from age 18 up to the day before your 40th birthday. And once open you can carry on paying into a Lifetime ISA up to the day before your 50th birthday.

Those who save for retirement in a SIPP, on the other hand, can get tax relief on their personal contributions up to 100% of their earnings.

They and their employer can tax-efficiently contribute up to a maximum of £40,000 a year in total (including tax relief), unless they are a very high earner or have already accessed their pension for income in which case their limit will be lower.

Basic-rate taxpayers will automatically benefit from what is effectively a 25% upfront boost via tax relief – the same amount as with a Lifetime ISA. Personal pension contributions paid net of taxed income get the basic rate tax at 20% paid back into the pension.

If you have £20 tax deducted from £100 of income and pay the £80 into a SIPP then HMRC will pay the £20 in too. Higher and additional-rate taxpayers can claim extra tax relief from HMRC through their annual tax return or if they are a higher rate taxpayer by phoning HMRC. They will carry on getting tax relief on pension contributions up to their 75th birthday.

Money saved in a pension cannot be accessed until age 55, with Government plans in place to increase this to 57 in 2028.


Send an email to with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not
provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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