When Lifetime Isas launched in 2017, I wasn’t interested in it at all: I already owned a house so didn’t need it for a deposit and was saving into my private pension. It seemed like a strange product.

Since then, I have been paying 15 percent of my salary per month into my private pension, made up of my own contributions and contributions from my employer.

I don’t think I should put more into it, then I started thinking… should I max out a Lifetime Isa every year for the guaranteed 25% bonus? And should my wife do the same?

Obviously we would use this in retirement when we can access it at 60.

We’re quickly approaching 40, so this is our last chance to have a Lisa. Is it worth it? Or would we be better off putting £4,000 a year elsewhere?

Tax benefits: All Lifetime Isa withdrawals are tax-free, while pensions only allow 25%

This is Money’s Harvey Dorset responds: It is good that you take steps to ensure that your future is as secure as possible.

Deciding whether or not to use a Lifetime Isa on top of your pension means you’re already on the right track.

The problem you face is establishing the potential benefits of each course of action – opening a Lisa, contributing more to your workplace pension – or doing something else.

Each has its own benefits, and which one is right for you will depend on your and your wife’s circumstances.

You and your wife can both put up to £4,000 a year into a Lisa, although this will eat into your annual Isa allowance of £20,000, and the government will reward you with a 25 per cent bonus on your savings.

This pales in comparison to the 40 per cent tax break you’ll get on pension contributions if you’re a higher rate taxpayer. If, on the other hand, you are a basic rate taxpayer, your pension will only benefit from a 20 per cent relief.

But what about the tax on withdrawals? A Lisa will allow you to withdraw your funds tax-free (although there will be a fee if you withdraw before the age of 60), while pension withdrawals are taxed as income.

On the other hand, pensions allow you to withdraw a tax-free 25 per cent lump sum, which could be more than the £40,000 you could save over the next ten years in your Lisa.

To do that, This is Money spoke to two financial advisors to find out what factors you should consider when deciding whether to open a Lisa or whether you should take an alternative route.

Age limit: Brian Byrnes says you can only withdraw from a Lisa at 60, while pensions allow withdrawals at 55

Brian Byrnes, head of personal finance at Moneybox, responds: First of all, it’s great that you’re thinking carefully about your retirement savings.

It is essential to address these issues as early as possible in life and as you have identified, there are many products designed to help you towards a comfortable and well-deserved retirement.

When considering retirement savings products, it’s important to think about your workplace retirement plan first for three main reasons.

Firstly, if you’re a higher rate taxpayer (earning more than £50,270), you’ll get 40 per cent tax relief on your pension contributions, which is much higher than the 25 per cent bonus you get on the Isa for life.

You also don’t pay National Insurance on pension contributions, so the ‘top-up’ tax relief can be significantly more attractive than the Lisa Bonus for higher (and additional) rate taxpayers.

Second, making retirement contributions through your paycheck is very simple from an administrative standpoint, and the tax relief happens automatically.

Third, as you mentioned, you receive contributions from your employer into your pension, so it’s always worth checking whether you’ve maxed out those contributions before looking elsewhere for retirement savings.

You say you shouldn’t invest more in your pension and it would be interesting to know why. The combination of employer contributions and tax relief is hard to beat elsewhere. Maybe your employer already pays the maximum amount.

If your wife is self-employed, the Lisa may be an attractive option, as she will not necessarily benefit from her employer’s pension contributions.

If either of you is a basic rate taxpayer, you still get basic rate tax relief (20 per cent) on your pension contributions.

Then again, you also save on National Insurance contributions, so the overall tax relief works in the same way as the Lisa Bonus.

You should therefore consider the wider features and benefits of pensions compared to the Lifetime Isa.

The main difference is the tax treatment of the withdrawal.

Pension income is taxable when withdrawn, while you can take a withdrawal from a Lisa tax-free.

While this may seem like a significant advantage of the Lisa over a pension, the latter benefits from a tax-free flat rate of 25 per cent and, like employed income, your first £12,570 of income is taxed at zero for cent, so a lot of your pension income may actually be tax free.

It is therefore difficult to make a direct comparison without knowing more about your financial situation and that of your wife.

It’s also worth noting that you can currently withdraw from a private pension at age 55, and will be able to do so until age 57 in 2028, whereas you cannot withdraw from a Lisa for retirement purposes until the age of 60 years.

The contribution limits are also very different. The maximum contribution to a Lisa is £4,000 per year, while for a pension you can contribute up to £60,000 per year.

In short, a lot will depend on your and your spouse’s personal financial circumstances, including the tax bracket you are currently in and therefore the tax relief applicable to your pension contributions.

The answer may well involve both a Lisa and keeping up your pension contributions. You can only open a Lisa up to the age of 40, but if you put £1 into a Lisa before your 40th birthday, you can continue to contribute until you’re 50.

So it might be a good idea to do this while you determine which option is best for you, or to keep the Lisa option if your circumstances change in the future.

Janice Dallas, independent financial advisor at Aberdein Considine Wealth, responds: There are a few things to consider when considering your question.

The ‘bonus’ paid by the government on Lifetime Isa contributions is 25 per cent for everyone. So if you pay 40 or 45 per cent tax on part of your income, you’ll get a better ‘bonus’ by paying more into your pension than into a Lisa.

You can only contribute to a Lisa until age 50. If you’re approaching 40, that means you can pay out up to £40,000, with bonuses of up to £10,000. Then, when you turn 60, you will be able to access your money.

Do your research: Janice Dallas says fees for different products could significantly change how much you have left

There are fewer options available for Lisas in the market compared to other types of Isa. And if you opt for a Lisa exchange and you know what you want to invest in, check if these investments are accessible through a Lisa.

If inheritance tax is likely to be an issue for you, keep in mind that currently pensions are not normally part of your taxable estate on death, unlike Isas.

Aside from inheritance tax, the final outcome of the same investment held in a pension or Lisa over the same period will be influenced by three key elements: tax reliefs or bonuses added to contributions made; product costs deducted; and, most importantly, the tax deducted when the funds are withdrawn.

Compare your private pension’s fees with Lisa’s fees. Even a small difference in annual charges can have a pretty big impact on the bottom line.

If you can find a Lisa with similar product fees to your private pension, then it’s your tax status that will make the difference, particularly the tax around withdrawals.

Under current rules you can withdraw 25 per cent of a private pension tax-free, with the remaining 75 per cent subject to income tax, while you can withdraw 100 per cent of a pension Lisa tax free.

So although higher and additional rate taxpayers may get better ‘bonuses’ from paying into a private pension, even basic rate tax deductions on 75 per cent of a pension fund in retirement will result in by a net return lower than that which would be obtained with a tax-free Lisa.

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