News

Amid mingling with friends and celebrating with family during the festive period, you might have quieter days to tackle some financial tasks as you enjoy a mince pie. Ticking off these jobs now could help ensure you have everything ready for 2026.

1. Go through your bank statements and Direct Debits

Go through your bank statements and keep an eye out for recurring payments for services that you no longer need. From an old gym membership to a streaming subscription, it’s easy to miss these payments.

Cancelling these Direct Debits might only save you £10 a month, but that can quickly add up over the year if there are a few of them.

2. Switch your savings account to secure a competitive interest rate

Is the interest rate on your savings competitive? Often, the best rates are offered to new customers, so switching your account or provider could boost your savings.

An easy-access savings account is useful if you’re saving for short-term goals or might need to access the money immediately, such as to cover an emergency expense.

If you won’t need to access the savings in the short term, you might want to consider a notice or fixed-term savings account, which might offer a higher interest rate.

With a notice account, you’ll need to provide notice before you withdraw cash. For example, you may need to provide 120 days’ notice. If you choose a fixed-rate savings account, you usually won’t be able to access your money until the end of the term.

3. Review the performance of your investments

Investment markets have experienced volatility throughout 2025. How has that affected your investments?

A quick review could help you see if you’re on track and identify where adjustments need to be made. Remember, investing should be reviewed with a long-term outlook. So, don’t just look at the performance of the last 12 months. A longer time frame could help you assess the overall trends.

4. Check your pension and the tax relief you’ve received

Your pension deserves some attention too. As you did for investments held outside your pension, assess the long-term trends.

You should also review where the contributions have come from. As well as your own contributions, you’ll typically have employer contributions (if you’re employed) and tax relief. If you’re a higher- or additional-rate taxpayer, you’ll need to complete a self-assessment tax form to receive all the tax relief you’re entitled to.

5. Go over your will

Your will states how you’d like your estate to be distributed when you pass away, so it’s important that it’s up to date.

If you need to make minor changes to your will, you can add a codicil. A codicil is a legal document that changes, adds to, or revokes a part of your will. You might use it to name a new executor or alter specific gifts. However, to avoid confusion following more extensive changes, it is best to write a new will that states the previous will is revoked.

6. Complete an expression of wish for your pension

Your pension won’t usually be covered by your will. Instead, complete an expression of wish form with each pension provider to tell them who you would like to receive your pension savings if you die. While this isn’t legally binding, the provider will usually follow your wishes.

If you’ve already completed an expression of wish form, be sure to check it still aligns with your estate plan.

7. Gift £3,000 as part of your estate plan

If your estate could be liable for Inheritance Tax (IHT), gifting may be part of your estate plan.

One gift considered immediately outside your estate for IHT purposes is up to £3,000 each year, known as the “annual exemption”. You can only carry forward your annual exemption for one tax year.

If you haven’t already used your annual exemption, you might want to use the festive period to do so.

8. Name a Lasting Power of Attorney

Naming a Lasting Power of Attorney (LPA) can protect you in the future if you’re unable to make decisions for yourself. It would give someone you trust the legal authority to make decisions for you.

While it can be difficult to think about, an LPA is an important document. There are two types of LPA, one for your financial affairs and one for your health and wellbeing, and it’s usually a good idea to have both in place.

Get in touch

If you have any questions about your finances or would like to talk to us about your plans for 2026, please get in touch.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate estate planning, Inheritance Tax planning, will writing or Lasting Power of Attorney.

How your pension is invested will affect its value and the income it will provide you later in life. If you’ve put off reviewing your pension fund, find out why it could be a worthwhile task.

While most pension providers offer savers plenty of fund options to choose from, many leave their money in the default option. Indeed, according to PensionBee (19.02.2025), more than 90% of pension savers remain in the default fund.

When you start contributing to a pension, you will usually be paying into the default fund option. This is convenient, as you don’t need to do anything, you simply make your contributions and the money will be invested through this fund.

The default fund is designed to be suitable for most savers, but it doesn’t consider personal circumstances or long-term plans.

Practical reasons the default pension option might not be right for you

The default fund doesn’t align with your risk profile

One of the main reasons you might choose to switch your pension fund is if the risk profile of the default option doesn’t suit your financial goals or circumstances.

For example, if you’re young and have decades until retirement, a default pension fund might be more risk-averse than is appropriate for you. As a result, you could miss out on investment returns, which, thanks to the power of compounding, may mean the size of your pot is significantly smaller at retirement than it had the potential to be.

According to the PensionBee research, a worker earning £25,000 a year at the age of 21 who benefits from a 2% average annual salary increase, and contributes 8% of their salary, would have £194,185 in their pension at age 68 (after an annual management charge of 0.7%) if their pension returned 3% a year.

If this individual changed their pension fund and received a 7% annual return, their pension would reach £697,247 over the same period. The higher returns could make a dramatic difference to the retirement lifestyle you can afford.

Before you switch your pension to a fund with a higher potential return, remember to balance the risks and assess what’s appropriate for you. Investment returns cannot be guaranteed, and typically, the higher the potential returns, the greater the risk.

As your financial planner, we can work with you to assess which pension fund is right for your circumstances and goals.

You are paying higher fees in the default fund

The fees you pay to your pension provider will affect the value of your pension. Take some time to review the fees you’re paying now and whether alternative options could reduce these charges.

Often, you’ll pay an annual management charge, which is typically a percentage of the value of your pension. You might also pay management or service fees.

Over the decades you’ll be saving for retirement, even a small difference in the fees you’re regularly paying could have a sizeable effect on the value of your pension when you retire.

You want your pension investments to reflect your values

Alongside financial factors, some investors may choose to consider ESG (environmental, social, and governance) factors. This could align your personal values with your financial decisions. For example, you might want to ensure your pension isn’t invested in fossil fuel companies if you’re concerned about climate change.

Pension providers will usually offer one or more ESG funds for you to switch your pension to. However, you should note that the aim of the funds can vary, and the investment decisions might not perfectly align with your values.

In addition, it’s still important to consider your risk profile and other financial factors when deciding if an ESG fund suits your needs.

Switching your pension is usually simple

The good news is that pension providers usually offer a range of funds with different risk profiles and goals. If the default pension fund isn’t the right option for you, you can often switch online in minutes.

When comparing options, you may want to look at the risk profile, the aim of the fund, and what the fund is invested in.

If you’d like to talk to a financial planner about the different investment options offered by your pension provider, and which might be right for your goals, please get in touch.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

After months of speculation and rumour, chancellor Rachel Reeves has delivered the Autumn Budget for 2025. In this update, we’ll explain the key changes and what they mean for you.

Last year, in her maiden Budget, the chancellor sought to balance the public finances with tax rises to cover a reported £22 billion black hole.

This year, Reeves arguably faced an even more difficult landscape. In turn, she has announced an estimated £26 billion of tax rises by 2029/30.

The chancellor had to start her speech, however, by acknowledging the “deeply disappointing” and “serious error” of the Budget announcements being released early by the Office for Budget Responsibility (OBR).

It’s also notable how many predictions ultimately proved to be wide of the mark.

Now that we know exactly what’s included, it’s important to understand the changes and how they could affect you.

The headlines regarding GDP, national debt, and inflation

The chancellor says the government’s plans will reduce borrowing more over the rest of this parliament than any country in the G7.

GDP is expected to grow by 1.5% in 2025, higher than the OBR’s 1% forecast from earlier this year. In subsequent years, the estimations are as follows:

• In 2026, the economy is forecast to grow by 1.4%, below the previous forecast of 1.9%.
• In 2027, GDP is forecast to expand by 1.6%, falling short of March’s estimate of 1.8%.
• In 2028, GDP is estimated to rise by 1.5%. In March of this year, the OBR said this figure would be 1.7%.
• In 2029, the economy will expand by 1.5%, again falling short of the previous estimate of 1.8%.

Due to weaker underlying productivity growth, the OBR estimates that tax receipts will be £16 billion lower in 2029/30 than initially forecast in March 2025.

Average inflation is expected to fall over the next three years.

• In 2025: 3.5%, an increase of 0.2% from the OBR’s original forecast.
• In 2026: 2.5%, up from the OBR’s 2.1% forecast from March.
• In 2027: 2%.

National debt will stand at £2.6 trillion this year. £1 in every £10 the government spends is on debt interest.

Tax threshold freezes extended until 2031

The Labour manifesto promised not to increase Income Tax or National Insurance (NI), and despite pre-Budget speculation, the government has kept to that promise in this Budget.

However, the chancellor did announce that the Income Tax thresholds will remain frozen for a further three years beyond the previous 2028 freeze, staying where they are until April 2031. This move will raise £8 billion for the government. Similarly, the Inheritance Tax (IHT) threshold freeze is extended from 2030 to 2031.

While this will not increase your Income Tax or IHT bills directly, this fiscal drag means more of your income and wealth may be exposed to tax over time.

The government is also upholding its commitment to bringing pension pots into the scope of IHT from April 2027, and reforms to relief for business and agricultural assets from April 2026.

The tax rates on dividends, savings, and property income will rise by two percentage points

Tax rates are set to rise for dividends, savings, and property income.

• Dividends: From April 2026, ordinary and upper rates of tax on dividend income will rise by two percentage points to 10.75% and 35.75% respectively. There is no change to the additional rate, which will remain at 39.35%.
• Property and savings: From April 2027, the rate of tax on property and savings income will increase by two percentage points across all tax bands to 22%, 42%, and 47% respectively.

The government confirmed that, even after these reforms, 90% of taxpayers will still pay no tax on their savings. However, these changes are set to impact business owners and landlords.

The chancellor says these increases will raise £2.2 billion in 2029/30.

The ISA allowance will be reformed for under-65s, and some allowances have been frozen

The chancellor announced that from April 2027, the Individual Savings Account (ISA) allowance will change for under-65s.

As it stands, adults can contribute £20,000 across their ISAs, including Cash ISAs and Stocks and Shares ISAs, each tax year.

From April 2027, £8,000 of this allowance will be reserved exclusively for investments, leaving an available £12,000 that savers can pay into their non-investment accounts, such as Cash ISAs.

Savers over the age of 65 will continue to be able to save up to £20,000 in a Cash ISA each year.

The allowances for Junior ISAs and Lifetime ISAs are frozen until April 2031 at £9,000 and £4,000 a year, respectively.

Salary sacrifice on pension contributions to be capped at £2,000

The chancellor put a cap on NI-efficient pension contributions made under salary sacrifice.

Salary sacrifice schemes cost the government £2.8 billion in 2016/17, but this figure was set to triple to £8 billion by 2030/31.

The government will charge employer and employee National Insurance contributions (NICs) on pension contributions above £2,000 a year made via salary sacrifice. This will take effect from 6 April 2029.

The chancellor says that many of those on low and middle incomes will be able to continue using salary sacrifice as normal, while high earners can expect to pay increased NI.

New “mansion tax” on high-value properties

The chancellor announced the much-speculated “mansion tax” that will affect the top 1% of properties.

The new property surcharge will be paid alongside Council Tax.

There will be four price bands starting with £2,500 for a property valued between £2 million and £2.5 million. For properties valued more than £5 million, the levy will be £7,500.

The measure is estimated to raise £400 million by 2031.

Welfare reforms expected to increase by 2029/30

The BBC reported that changes to the government’s previously announced winter fuel payments and health-related benefits will cost £7 billion in 2029/30.

In addition, Reeves revealed she would remove the two-child benefit cap. This will cost £3 billion by 2029/30.

State Pension: Removal of overseas access to Class 2 National Insurance contributions and committing to the triple lock 

As a result of a loophole in the Class 2 voluntary NICs regime, overseas individuals with a limited connection to the UK can build a State Pension entitlement through cheaper rates.

The government is looking to end this by removing access to the cheapest Class 2 NICs for these individuals. Additionally, it will increase the initial residency or contribution requirements for those living outside the UK.

The chancellor also confirmed the government’s commitment to the triple lock. From April 2026, this will increase the basic and new State Pension by 4.8%, offering up to an additional £575 per year to pensioners, depending on their entitlement.

A range of significant changes for business owners

In addition to the Dividend Tax increase, the chancellor announced a range of changes that could affect business owners, including:

• Increases to both the National Living Wage (NLW) and National Minimum Wage (NMW). From 1 April 2026, the NLW paid to workers aged 21 and over will rise by 4.1%, from £12.21 to £12.71 an hour, increasing annual income by approximately £900 a year for full-time employees. For those aged 18 to 20, the NMW will rise by 8.5% from £10 to £10.85 an hour, equivalent to around £1,500 a year if working full-time. For 16- and 17-year-olds, and those on apprenticeships, the NMW will rise by 6%, going from £7.55 to £8 an hour.
• Listing Relief from Stamp Duty Reserve Tax for some businesses. The chancellor said this will “make it easier for entrepreneurs to start, scale, and stay in the UK”.
• Reduced Capital Gains Tax (CGT) relief for Employee Ownership Trusts (EOTs). When a business is sold to an EOT, CGT relief will fall from 100% to 50% starting from November 2025. This will raise £0.9 billion from 2027/28 onwards.
• Fully funded apprenticeships for under-25s. This will make them effectively free for small- and medium-sized businesses (SMEs) from April 2026.
• Lower business rates for more than 750,000 retail, hospitality, and leisure properties. That move will be funded through higher rates on properties worth £500,000 or more, such as warehouses used by online retail.
• Customs duty will apply to parcels of any value from March 2029 at the latest. There is an existing exemption for parcels worth less than £135, favouring large-scale importers.

Other announcements that may affect you

• Household energy bills will fall. Reeves is scrapping the Energy Company Obligation (ECO) scheme, saying that on average, families will save £150 a year in 2026.
• A new tax on electric vehicles. The Electric Vehicle Excise Duty (eVED) will come into effect in 2028 and equal 3p per mile for battery electric cars and 1.5p per mile for plug-in hybrids. The rate per mile will increase annually in line with the CPI.
• Fuel duty will be frozen until September 2026. In addition, a new “fuel finder” will help drivers find the cheapest fuel, saving the average household £40 a year.
• Reducing the levy threshold on soft drinks. From 1 January 2028, the sugar tax will also be applied to milk-based drinks, including bottled milkshakes and lattes.
• A spousal exemption for agricultural and business asset IHT relief. Unused combined business and agricultural asset IHT relief will become transferable between spouses and civil partners.
• Tobacco Duty and Alcohol Duty will both be uprated. Tobacco Duty will be uprated as announced last year, and Alcohol Duty will now rise with inflation.
• Rising taxes on online gambling. From April 2026, Remote Gaming Duty will increase by 21% to 40%. A new Remote Betting Rate set at 25% will be introduced from April 2027, though horse race betting will be exempt from the changes.

Other key thresholds that remain the same

More broadly, the chancellor made no mention of other key thresholds that will remain the same. These include:

• The pension Annual Allowance
• Stamp Duty Land Tax for residential properties
• The headline rates of Income Tax, NI, and VAT, as outlined in the government’s election manifesto.

Please note

All information is from the Budget documents on this page.

The content of this Autumn Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.

While we believe this interpretation to be correct, it cannot be guaranteed, and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.

The arrival of the colder months means preparing for Christmas, thinking about your new year resolutions, and planning to battle illnesses.

Whether you’re ill for a few days or you’re diagnosed with a long-term condition, needing to take time off work can have a financial impact. While you can’t predict when you’ll fall ill, there are some steps you can take to limit the effect it has on your finances.

A September 2025 report from CIPD found that the average UK employee took almost two full working weeks of sickness absence in the last 12 months. The number of sick days is a record high and represents a 62% increase compared with pre-pandemic levels.

Fortunately, most sickness absences are short-term, and people make a full recovery. However, there are times when people need to take an extended period off work. At a time when you should be focusing on your health, being unable to work could put your finances under pressure.

Reviewing your financial safety net before you fall ill could provide peace of mind and identify any gaps. Here are three steps to take to prepare for illness.

Step 1: Calculate what pay you’d receive if you’re unable to work

If you’re an employee and earn at least £125 a week, you’ll usually be entitled to Statutory Sick Pay (SSP) if you’re ill for more than three days in a row. SSP can be a useful boost to your finances if you’re ill for a short period.

However, it’ll only be paid for up to 28 weeks and might run out if you’re dealing with a long-term illness. In addition, for 2025/26, SSP is £118.75 a week, so it’s often not enough to cover your outgoings alone.

Your employer may also provide an enhanced sick pay policy, which varies between businesses. When reading your contract or speaking to HR, be sure to check what portion of your income you’d be paid and how long you’d receive sick pay.

Step 2: Establish an emergency fund

Once you know what you’d receive, you can assess how much to keep in an emergency fund to cover short-term illnesses.

Your emergency fund should be readily accessible, such as a savings account. A general rule is to have six months of essential outgoings in your emergency fund.

Depending on the income you’d receive when ill, you may adjust this amount to suit your needs. For instance, if your employer would provide you with your full income for three months, you might feel comfortable having a reduced amount in your emergency fund.

Step 3: Assess your financial protection

While an emergency fund could provide a way to cover your expenses if you were ill for a few months, what would happen if you needed to take a year off work, or were unable to return to work at all?

Appropriate financial protection could provide a solution.

Financial protection would pay out when certain conditions are met. When preparing financially for unexpected illnesses, there are two main ones to consider – income protection and critical illness cover.

Income protection would provide you with a regular income if you’re unable to work due to an accident or illness. The payout is usually a portion of your salary, and it would continue until you return to work, retire, or the term ends.

The regular income can be used however you wish, including to meet your day-to-day expenses while you can’t work.

Critical illness cover would pay out a lump sum if you were diagnosed with a covered illness. Again, you can use the money you receive how you wish, from paying household bills to adapting your home in light of your diagnosis.

Not all illnesses are covered by critical illness cover. Be sure to read the paperwork thoroughly before going ahead to understand how comprehensive it is and whether it’s right for you.

Workers with dependents might also want to consider life insurance. This would pay out a lump sum to your beneficiaries if you passed away during the term.

Going back to step one to understand what financial pressure you could face if you were ill for an extended period can help you assess whether you have sufficient cover or might benefit from additional protection.

Contact us

If you’d like to discuss financial protection or how your finances would cope if you were unable to work, please get in touch to arrange a meeting.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

An estate plan sets out how you’d like your assets to be managed and distributed during your life and when you pass away. It often involves thinking about difficult topics, such as your funeral preferences or who you’d like to receive heirloom possessions.

Once you’ve created an estate plan, it can be tempting to put it to the back of your mind.

However, both you and your loved ones could benefit from discussing the contents of your estate plan. While these topics can be challenging and emotional to bring up, they could be a valuable way for you and your family to align on your understanding and expectations.

Here are three conversations you might want to have with your loved ones about your estate.

1. How your assets will be distributed when you pass away

Many people decide not to share how their estate will be distributed when they pass away. According to a September 2025 article from FTAdviser, 36% of UK adults don’t know what their parents’ inheritance plans are.

There are several reasons why you might choose to discuss the contents of your will.

One key reason is that it can help your loved ones effectively plan their own long-term finances. Understanding what they’ll inherit could allow them to make informed decisions.

For example, if your child is expecting a substantial inheritance, they might plan to rely on it for retirement rather than contributing to a pension. If the expected inheritance doesn’t materialise, they could face hardship later in life. By being aware of your wishes, they could take steps now to ensure they’re able to retire comfortably.

Another reason to have an open discussion is that it could reduce the chance of your will being contested.

An April 2025 article from Today’s Wills & Probate noted there was a 5% increase in contested wills reaching the courtroom between 2022 and 2023.

Speaking to your loved ones now gives you a chance to explain your wishes, reduce the risk of someone feeling blindsided, and address potential disputes.

2. Your Inheritance Tax position

If your estate may be liable for Inheritance Tax (IHT), it can be valuable to discuss the potential bill and any steps you’ve taken to mitigate it – especially if a family member will act as your executor.

Loved ones may be uncertain about IHT and how it might affect their inheritance. Having a discussion now about your IHT position could put their mind at ease.

Your chosen executor will be responsible for handling your estate, including selling assets, such as property or investments, and reporting the value of your estate to HMRC. They will also be responsible for paying IHT on behalf of the estate. Consequently, gaining a clear understanding of your tax strategy could make the process less stressful and ensure that any steps you’ve taken to reduce the bill aren’t overlooked.

3. Your wishes if you lose mental capacity

Your estate plan isn’t only about how you’ll pass on assets, but how you’d like your affairs to be managed if you’re unable to oversee them later in life.

Thinking about losing mental capacity can be emotional, but talking about your wishes can provide your loved ones with valuable guidance.

As part of your estate plan, you might give someone you trust Power of Attorney (POA), which would give them the power to make decisions on your behalf.

There are two types of POA, covering financial affairs and your health and wellbeing. You might want to talk to loved ones about topics like:

• Your preferences if you need care later in life
• Where your assets are held and how they should be managed
• Under what circumstances you would prefer to receive life-sustaining treatment.

Your financial planner can help you tackle estate planning conversations

You don’t have to tackle these difficult conversations alone. Sometimes, having an impartial third-party present could be useful.

For example, we can be on hand to answer your family’s questions about acting as an attorney, managing an inheritance effectively to reflect their goals, or understanding how assets will be distributed to minimise potential disputes.

While having discussions about your wishes for later in life or when you pass away can be challenging, they can provide clarity for both you and your family. Please get in touch if you’d like to talk to us about your estate plan.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority doesn’t regulate will writing, Power of Attorney, Inheritance Tax planning or estate planning.

When you start searching for the best ways to build a retirement fund, private pensions might be the first option that comes to mind.

However, they’re not the only way you can prepare for your life after work. An alternative is the Lifetime ISA (LISA) – a government-backed savings account.

While you might assume you can only use a LISA to purchase your first home, this isn’t its only purpose.

In fact, according to Financial Planning Today in September 2025, 45% of LISA savers opened their accounts specifically to save for retirement, compared to 46% who opened theirs to purchase a first home.

Despite their popularity, LISAs come with strict rules you must understand before you can decide whether they’re the most suitable choice.

Continue reading to discover how a LISA compares with a pension so you can make an informed decision about which best suits your long-term needs.

Lifetime ISAs are another form of Individual Savings Account that allows you to save wealth

A LISA is a specific type of savings account that can be opened by anyone between the ages of 18 and 39. You can use it to either save for the deposit on your first home or build a fund for later life.

As of 2025/26, you can contribute up to £4,000 each year to your LISA.

It’s important to remember that this forms part of your overall £20,000 ISA allowance. If you save the full £4,000 into your LISA, you can only invest a further £16,000 in your Cash or Stocks and Shares ISAs.

You can benefit from a government bonus when you contribute to your Lifetime ISA

There are two main types of LISA. A Cash LISA functions much like a traditional savings account, offering interest on your wealth.

Meanwhile, a Stocks and Shares LISA allows you to invest your contributions in a range of assets. While this typically exposes you to risk, it gives your wealth the potential for more competitive long-term returns.

For every £1 you contribute to your LISA, you can benefit from a 25% government bonus. This means that if you deposit the full £4,000, your total savings for the year could reach £5,000.

While you can only open a LISA until your 40th birthday, you can continue receiving the government bonus until you reach age 50. This could significantly bolster the overall value of your retirement savings.

Better yet, as is the case with other forms of ISAs, your savings and investments are completely free from Income Tax, Capital Gains Tax, and Dividend Tax.

You will typically face a withdrawal penalty if you don’t use the wealth for specific reasons

Perhaps the main limitation with LISAs is that you must use the funds to pay for the deposit for your first home (provided the property costs £450,000 or less) or leave them invested until you reach the age of 60.

If you withdraw funds for any other reason, you’ll typically face a 25% fee. This penalty removes the government bonus and takes a portion of your savings, meaning you could receive less than you originally put in.

For instance, if you contributed £10,000 over several years, you would receive a total government bonus of £2,500. If you then withdrew this early, the 25% charge would be £3,125, leaving you with just £9,375.

If you’re approaching the age of 40 and haven’t yet opened a LISA, it’s worth considering whether the remaining years of government bonuses make it worthwhile.

Pensions allow you to build a pot of wealth to support your dream lifestyle when you stop working

Pensions are one of the more effective ways to save for retirement.

You can tax-efficiently contribute to a pension while still benefiting from tax relief up to the value of the “Annual Allowance”. As of 2025/26, it stands at £60,000, or 100% of your earnings, whichever is lower. This includes personal and employer contributions, as well as tax relief.

This is significantly higher than the LISA limit, allowing you to save more each year.

You can even benefit from tax relief, which is when the government essentially “tops up” any contributions based on your marginal rate of Income Tax. This means that a £100 contribution would only “cost”:

• £80 for basic-rate taxpayers
• £60 for higher-rate taxpayers
• £55 for additional-rate taxpayers.

This government bonus makes saving in your pension particularly attractive, as it could help you reach your long-term goals more quickly.

While you can take the first 25% of your pension without incurring tax, the rest could count as income

Unlike a LISA, you can begin accessing your pension from the age of 55 (rising to 57 by April 2028).

You can then typically take the first 25% of your fund without incurring tax, while the remainder is treated as taxable income.

This means that when you draw from your pension, those withdrawals are added to any income you receive in that year, such as from your State Pension or property wealth. They will then be taxed at your marginal rate.

This means you could pay:

• 20% on income between £12,570 and £50,270 (the basic rate)
• 40% on income between £50,270 and £125,140 (the higher rate)
• 45% on income above £125,140 (the additional rate).

However, you do have flexibility over how you take the remainder of your pension fund.

You could choose to withdraw it through flexi-access drawdown, allowing you to leave the rest of your fund invested to continue generating potential returns.

Alternatively, you could use it to purchase an annuity – a form of insurance product that offers a guaranteed income for a set period of time.

You can also invest in a range of assets through your pension

Most pensions allow you to invest your contributions in a range of assets, which could offer competitive returns over time.

You can typically choose from several different strategies to suit your tolerance for risk and investment time horizon.

Over several decades, the compounding effect – essentially “growth on growth” – combined with tax relief and employer contributions, could make pensions a practical long-term savings method.

A financial planner could help you decide which option would best suit your needs

When comparing a LISA and a pension, the “right” decision for you will largely depend on your goals, income, and the stage of life you’re currently at.

If you’re younger and want the flexibility to either purchase your first home or supplement your retirement fund, the government bonuses and tax-free growth of a LISA could benefit you.

Conversely, if your main focus is retirement and you want to take advantage of the higher contribution limits and tax relief, a pension might be the wiser option.

To ensure that your approach fits your personal circumstances, it’s worth seeking bespoke advice from a financial planner.

A financial planner could help you determine which option – or combination of options – best supports your retirement goals.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.