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Should you save in the Lifetime ISA instead? An alternative to a pension is the Lifetime ISA. This is a savings account to save for a first home and/or retirement, open to anyone under the age of forty. As with other ISAs, you don't pay tax on the returns on your savings. You can put in up to PS4,000 a year and will receive a bonus of 25 per cent - that is up to PS1,000 - from the government until you are fifty, or until you have used the LISA to buy your first home, whichever is sooner. You can use the money to buy a home worth a maximum of PS450,000, otherwise you cannot take it out before you hit sixty without losing your bonus and some, the equivalent of about 6 per cent of your total pot. This is more flexible than a pension, though, where you cannot take the money out at all before fifty-five. Savers have the potential to earn a total of PS33,000 in bonuses if they pay in the maximum PS128,000 from age eighteen until they turn fifty. Accounts can be held in cash, or stocks and shares. If you are a higher-rate taxpayer the LISA is not as generous as the tax relief you get on a pension, however.

You can also use the LISA to invest in the stock market. The LISA functions as an alternative to a pension: you can save into it for either a home, or until you are sixty, though you cannot deposit any new money beyond the age of 50. (More on using a LISA as an alternative to a pension in the pensions chapter). The downside is that, unlike the Help to Buy ISA, you cannot withdraw your cash unless you are buying a house, or until you are sixty, though, whichever is sooner, without being penalized by losing interest.