SIPP, workplace pension, ISA or Lifetime ISA? The 2026/27 rules side by side

£1,000 into a pension costs a basic-rate taxpayer £800, and a Lifetime ISA turns £4,000 into £5,000. I lined up all four UK wrappers on the official numbers, with every figure sourced

Education and opinion only. Not financial, investment, tax, legal or insurance advice. Full disclaimer at the end.

Put £1,000 into a UK pension this tax year and it costs a basic-rate taxpayer £800. A higher-rate taxpayer who claims the extra relief pays £600. Put £4,000 into a Lifetime ISA and the government adds £1,000. Put the same £4,000 into a stocks and shares ISA and nobody adds anything, but you can take it out next week without asking anyone’s permission.

Four very different deals, and most people choose by habit. The rules are moving too. The minimum age for taking a pension rises to 57 in April 2028. Most unused pension pots come into Inheritance Tax from April 2027. Salary sacrifice loses most of its National Insurance saving from April 2029. And the Budget on 28 October 2026 confirmed that the Lifetime ISA will be replaced for new savers by a First Time Buyer ISA from April 2029.

So I lined up the four main wrappers on the official 2026/27 numbers, in pounds. It’s written mainly for UK readers, with a short section near the end for Australia, New Zealand and Canada.

How I put this together

I opened every source on 5 November 2026 (NZT). Almost all are GOV.UK, HMRC or HM Treasury pages, including the Budget 2026 document from 28 October. Overseas figures come from the tax authorities in Australia, New Zealand and Canada.

The worked examples use 2026/27 income tax and National Insurance rates for England, Wales and Northern Ireland. Scottish bands differ. I’ve left out investment growth and fees on purpose, because they apply to all four wrappers and would hide the tax differences. Rules can change before you need the money, and several already are.

The scorecard (opinion)

• Boost on the way in: Workplace pension 5, SIPP 4, Stocks and shares ISA 1, Lifetime ISA 4
• Employer money: Workplace pension 5, SIPP 1, Stocks and shares ISA 1, Lifetime ISA 1
• Access before retirement: Workplace pension 1, SIPP 1, Stocks and shares ISA 5, Lifetime ISA 3
• Tax on the way out: Workplace pension 3, SIPP 3, Stocks and shares ISA 5, Lifetime ISA 5
• Control over investments: Workplace pension 2, SIPP 5, Stocks and shares ISA 5, Lifetime ISA 3
• Simplicity: Workplace pension 5, SIPP 3, Stocks and shares ISA 4, Lifetime ISA 2
• Stability of the rules: Workplace pension 2, SIPP 3, Stocks and shares ISA 4, Lifetime ISA 2
• Total (out of 35): Workplace pension 23, SIPP 20, Stocks and shares ISA 25, Lifetime ISA 20

These are my opinion scores, not a recommendation. With every row weighted equally, the stocks and shares ISA comes out top. That’s exactly why equal weights mislead here. For most employees, the employer money row is worth more than the other six put together, because you can’t get that money anywhere else. Weight it properly and the workplace pension wins easily. Weight access heavily, as someone in their twenties saving for a deposit might, and the Lifetime ISA moves up.

What each one actually is

A workplace pension is the scheme your employer runs or chooses. Under automatic enrolment, GOV.UK says the minimum total contribution is 8%, of which your employer must pay at least 3%, usually on qualifying earnings between £6,240 and £50,270. You get tax relief on your share.

Self-invested personal pensions, or SIPPs, are ones you open yourself, often on an investment platform. The tax rules are the same as for other registered pensions, but you choose the investments, and nobody else pays in unless you arrange it.

Stocks and shares ISAs are Individual Savings Accounts that hold investments. GOV.UK sets the 2026/27 ISA allowance at £20,000 across all your ISAs, and you must be 18 or over. There’s no tax relief going in. Growth and withdrawals are tax-free.

Lifetime ISAs take up to £4,000 a year, and the government adds a 25% bonus of up to £1,000 a year. You must be 18 to 39 to open one, and can pay in until 50. It counts towards the £20,000 allowance. The money is meant for a first home, for after 60, or for terminal illness.

How pension tax relief works

GOV.UK describes two methods. With relief at source, you pay in from taxed pay and your provider claims 20% basic-rate relief and adds it to your pot. With net pay, your employer takes the contribution before tax is worked out, so you get relief at your top rate automatically.

Most SIPPs use relief at source. If you pay tax above the basic rate, you claim the extra yourself through Self Assessment: another 20% at the higher rate and another 25% at the additional rate, on the income taxed at those rates. Plenty of people never claim it.

What it costs you to get £1,000 into a pension (2026/27)

• Basic-rate taxpayer, relief at source: Your cost £800
• Higher-rate taxpayer, after claiming the extra relief: Your cost £600
• Additional-rate taxpayer, after claiming the extra relief: Your cost £550
• Basic-rate employee, salary sacrifice (tax and 8% National Insurance saved): Your cost about £720
• Higher-rate employee, salary sacrifice (tax and 2% National Insurance saved): Your cost about £580

There are limits. Relief applies to contributions up to 100% of your earnings, or £3,600 gross if that’s higher. The annual allowance is £60,000 for 2026/27 and covers all your pensions, employer money included, with unused allowance from the previous three tax years possibly carried forward. Very high earners face a taper once threshold income passes £200,000 and adjusted income passes £260,000, down to a minimum of £10,000. And once you’ve flexibly taken money from a pot, the money purchase annual allowance caps further relief at £10,000 a year.

My take (opinion): the relief is real money, but you pay income tax on most of what comes out, so the win depends on your tax rate now compared with later.

Workplace pensions and salary sacrifice

Take the minimum automatic enrolment deal on a £30,000 salary. Qualifying earnings are £30,000 minus £6,240, or £23,760. Eight percent of that is £1,900.80 a year. Your employer pays at least £712.80, and your 5%, £1,188, includes the tax relief. GOV.UK’s own example: you put in £40, your employer £30 and tax relief £10, so £80 goes in.

Many employers pay more, and some match extra contributions up to a limit. That match is the best deal on this page, because you get it before any investment has moved.

With salary sacrifice, you give up part of your salary and your employer pays it into your pension. Because it never counts as pay, you save National Insurance as well as income tax. In 2026/27, employee National Insurance is 8% on earnings from £242.01 to £967 a week and 2% above that. Employers pay 15%. So £1,000 into a pension this way cuts a basic-rate employee’s take-home pay by about £720 rather than £800, and the employer saves £150, which it may or may not pass on.

That changes from 6 April 2029. HMRC says only the first £2,000 a year sacrificed into a pension will be free of National Insurance. Above that, employee and employer National Insurance apply. Income tax relief is unchanged, and ordinary employer contributions that aren’t sacrificed stay free of National Insurance.

Say you sacrifice £6,000 a year. From April 2029, £4,000 of it is above the cap. If your earnings sit in the 8% band, that’s £320 more employee National Insurance a year, or £80 if you’re above the upper limit at 2%. Your employer pays £600 more. HMRC’s impact note estimates around 56% of employees making typical salary sacrifice contributions won’t be affected, and puts the average extra employee National Insurance for those above the limit at £84 in 2029/30.

My take (opinion): if your employer offers a match, I can’t think of a wrapper that beats it. The 2029 cap trims salary sacrifice for bigger contributors, but leaves the employer’s own money alone.

The SIPP: same tax rules, more control

SIPPs get the same tax relief, annual allowance, access age and tax on withdrawal as a workplace pension. The difference is control. You pick the provider and the investments, and you can gather old workplace pots in one place.

What it lacks is an employer. For the self-employed, that doesn’t matter, and a personal pension is the obvious home for tax relief. For an employee, paying into a SIPP instead of the workplace scheme can mean giving up employer contributions.

My take (opinion): a SIPP suits people who want their own investment choices and don’t mind the admin. It earns its place for the self-employed and for tidying old pots, not as a swap for an employer match.

The stocks and shares ISA: no boost, no lock

This is the plain option. There’s no relief and no bonus. You invest money you’ve already paid tax on, up to £20,000 a year across all your ISAs, and you never pay income tax or capital gains tax on what comes out. You can take it out at any age.

Freedom like that is hard to score. A pension is locked until 55, rising to 57 from April 2028. An ISA can pay for a career break, a redundancy or a bridge to pension age. The Budget kept the cash ISA limit at £20,000 for everyone, and said the government would explore a new incentive for first-time stocks and shares ISA investors. No detail yet.

Tax on savings outside ISAs is also going up. From 6 April 2027, the Budget raises savings income tax rates by two points to 24%, 44% and 49%, which makes the shelter a little more valuable.

My take (opinion): the ISA is the wrapper you’re most likely to actually use, because you can see it, reach it and change your mind. For money you might need before your late fifties, I think that flexibility outweighs the missing tax relief.

The Lifetime ISA: the best bonus, the sharpest exit

Going in, the 25% bonus matches basic-rate pension relief: £4,000 becomes £5,000. Coming out at 60 or over, it’s all tax-free, which a pension isn’t. For a basic-rate taxpayer with no employer money on offer, that can beat a pension.

The exit is where it bites. GOV.UK says any other withdrawal carries a 25% charge on the whole amount, which is bigger than the bonus. On a £5,000 pot built from £4,000 of your money, the charge is £1,250 and you get £3,750. You’ve lost £250 of your own money, or 6.25%.

First homes must cost £450,000 or less. Buying above that now carries a 20% charge, cut from 25% by the Budget from 29 October 2026. On that £5,000 pot, you’d get back £4,000, roughly what you paid in.

And the Budget says a First Time Buyer ISA will replace the Lifetime ISA for new savers from 6 April 2029. It keeps the £4,000 limit and 25% bonus, pays the bonus on withdrawal for a qualifying first home up to £450,000, and has no upper age limit. The Budget doesn’t spell out what happens to existing Lifetime ISAs, so I wouldn’t assume.

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My take (opinion): for someone under 40, on the basic rate, fairly sure they’ll either buy a first home under the cap or leave the money until 60, the Lifetime ISA is a very good deal. For anyone less sure, the exit charge turns it into a bet.

£4,000 of your own money, four ways

Here’s one basic-rate taxpayer putting £4,000 of their own money into each wrapper and taking it out after 60. No growth, no fees, no employer money, 2026/27 rules.

• Lifetime ISA (25% bonus): Goes in as £5,000, Comes out after 60 £5,000, tax-free
• Pension, rest taxed at 20% in retirement: Goes in as £5,000, Comes out after 60 £4,250
• Pension, rest within the Personal Allowance: Goes in as £5,000, Comes out after 60 £5,000
• Stocks and shares ISA: Goes in as £4,000, Comes out after 60 £4,000, tax-free

In the pension rows, a quarter of the pot, £1,250, comes out tax-free and the other £3,750 is taxed as income. In the basic-rate band you keep £4,250. If it fits inside the £12,570 Personal Allowance, you keep £5,000. But the full new State Pension, at £241.30 a week, uses most of that allowance on its own.

For a higher-rate taxpayer, the picture tilts the other way. The same £4,000 out of pocket gets about £6,666.67 into a pension once the extra relief is claimed. If that’s later taxed at the basic rate, it comes out at about £5,666.67, against £5,000 from a Lifetime ISA.

My take (opinion): there’s no single answer. The basic-rate taxpayer ties between the Lifetime ISA and a pension at best. The higher-rate taxpayer does better in the pension. Both do better still with an employer adding money, the row I left out because it isn’t a fair fight.

Getting the money out

Pensions can usually be taken from 55 today. HMRC confirms the normal minimum pension age rises to 57 on and after 6 April 2028. Some people with a protected pension age keep an earlier one, and the firefighter, police and armed forces schemes aren’t affected.

When you do take it, GOV.UK says you can usually have up to 25% as a tax-free lump sum, capped at £268,275 unless you have protection, with the rest taxed as income. The cap only bites on a pot of about £1,073,100. ISAs have no age rule, and the Lifetime ISA opens at 60.

Death is the bigger change. HMRC says most unused pension funds and death benefits will count towards an estate for Inheritance Tax from 6 April 2027, with death in service benefits excluded. Personal representatives will be liable, and can ask schemes to hold back 50% for up to 15 months. The Finance Act 2026, given Royal Assent on 18 March 2026, sets this in law.

Separately, the Budget brings in a Pension Tax Allowance from April 2027, so pensioners with income at or below the full new State Pension won’t be pulled into tax by State Pension rises. The Treasury says around 500,000 pensioners benefit in 2027/28.

My take (opinion): many people treated a pension as the last pot to spend and the one to pass on. From April 2027 that logic weakens. It doesn’t make pensions bad, but it’s a good reason to think about the order you’d draw from each wrapper.

If you are not in the UK

Most countries have their own version of this trade between a boost going in and freedom getting out.

Australia. The ATO puts the superannuation guarantee at 12% for 1 July 2026 to 30 June 2027, and the concessional contributions cap at $32,500 from 1 July 2026. Super plays the workplace pension role, with employers paying the guarantee.

New Zealand. Inland Revenue says the default KiwiSaver employee contribution and matching employer rate rose from 3% to 3.5% on 1 April 2026, rising to 4% on 1 April 2028. A temporary rate reduction is available. The government contribution is 25 cents per dollar, up to $260.72 a year, with none for people earning over $180,000.

Canada. The CRA sets the 2026 TFSA dollar limit at $7,000 and the RRSP limit at $33,810. The TFSA is the ISA lookalike. The RRSP works more like a pension.

My take (opinion): wherever you live, the questions are the same. Who else is paying in, what tax you save now compared with later, and how locked up the money is.

What I am watching

• First Time Buyer ISA detail. It starts in April 2029 for new savers. I’ll be looking for what the government says about existing Lifetime ISAs.
• The new stocks and shares ISA incentive. The Budget says the design will be developed with industry.
• Inheritance Tax on pensions from 6 April 2027. Schemes and personal representatives will be working through the process before then.
• The pension age rise on 6 April 2028. Anyone planning to draw a pension at 55 or 56 around then should check their scheme’s position.
• Salary sacrifice from 6 April 2029. Employers may change how they structure pension schemes ahead of the £2,000 cap.

Verdict (in general terms)

In my opinion, a common order looks like this. First, take whatever an employer will pay into a workplace pension, because no other wrapper hands you someone else’s money. Then, for under-40s on the basic rate with a clear first-home or after-60 plan, the Lifetime ISA’s bonus is hard to beat. A stocks and shares ISA suits money you might want before your late fifties. A SIPP earns its place for the self-employed, for higher-rate taxpayers wanting more pension room, and for gathering old pots.

Those orderings have limits. Your tax rate in retirement is a guess. Access ages, salary sacrifice, Inheritance Tax and the Lifetime ISA all change within three years. And investment choice and fees can matter as much as the wrapper.

None of that is advice. It’s the general shape I see in the numbers. If I had to sum it up in one line, it’s that the best wrapper is usually the one with an employer paying into it, and the second best is the one you’ll actually keep using.

Sources (opened 5 Nov 2026)

1. GOV.UK, “Tax on your private pension contributions”, https://www.gov.uk/tax-on-your-private-pension
2. GOV.UK, “Tax on your private pension contributions: tax relief”, https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
3. GOV.UK, “Tax on your private pension contributions: annual allowance”, https://www.gov.uk/tax-on-your-private-pension/annual-allowance
4. HMRC, “Pension schemes rates and allowances”, https://www.gov.uk/government/publications/rates-and-allowances-pension-schemes/pension-schemes-rates
5. GOV.UK, “Tax when you get a pension: what’s tax-free”, https://www.gov.uk/tax-on-pension/tax-free
6. HMRC, “Increasing normal minimum pension age”, 4 Nov 2021, https://www.gov.uk/government/publications/increasing-normal-minimum-pension-age/increasing-normal-minimum-pension-age
7. GOV.UK, “Workplace pensions: what you, your employer and the government pay”, https://www.gov.uk/workplace-pensions/what-you-your-employer-and-the-government-pay
8. GOV.UK, “National Insurance rates and category letters”, https://www.gov.uk/national-insurance-rates-letters
9. GOV.UK, “Income Tax rates and Personal Allowances”, https://www.gov.uk/income-tax-rates
10. HMRC, “Changes to salary sacrifice for pensions from April 2029”, 26 Nov 2025, https://www.gov.uk/government/publications/changes-to-salary-sacrifice-for-pensions-from-april-2029/changes-to-salary-sacrifice-for-pensions-from-april-2029
11. HMRC, “Salary sacrifice reform for pension contributions”, 4 Dec 2025, https://www.gov.uk/government/publications/salary-sacrifice-reform-for-pension-contributions-effective-from-6-april-2029/salary-sacrifice-reform-for-pension-contributions
12. GOV.UK, “Individual Savings Accounts (ISAs)”, https://www.gov.uk/individual-savings-accounts
13. GOV.UK, “Lifetime ISA”, https://www.gov.uk/lifetime-isa
14. GOV.UK, “Lifetime ISA: withdrawing money”, https://www.gov.uk/lifetime-isa/withdrawing-money-from-your-lifetime-isa
15. HM Treasury, “Budget 2026”, 28 Oct 2026, https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html
16. HM Treasury, “Budget 2026: breathing space for today, hope for the future”, 28 Oct 2026, https://www.gov.uk/government/news/budget-2026-breathing-space-for-today-hope-for-the-future
17. HMRC, “Inheritance Tax: unused pension funds and death benefits”, 26 Nov 2025, https://www.gov.uk/government/publications/inheritance-tax-unused-pension-funds-and-death-benefits
18. HMRC, “Technical note: Inheritance Tax on pensions”, https://www.gov.uk/government/publications/inheritance-tax-on-pensions-technical-note/technical-note-inheritance-tax-on-pensions
19. GOV.UK, “The new State Pension: what you’ll get”, https://www.gov.uk/new-state-pension/what-youll-get
20. Australian Taxation Office, “Super guarantee”, https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/super-guarantee
21. Australian Taxation Office, “Contributions caps”, https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/contributions-caps
22. Inland Revenue, “KiwiSaver changes”, https://www.ird.govt.nz/kiwisaver-changes
23. Canada Revenue Agency, “MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE”, https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/pspa/mp-rrsp-dpsp-tfsa-limits-ympe.html

Disclaimer

This article is education and opinion only. It is not financial, investment, tax, legal or insurance advice, and it isn’t a recommendation to open, pay into, transfer or withdraw from any pension, ISA or other product. I’m not a regulated financial adviser. Tax rules, allowances and rates are as published on the dates shown, apply to England, Wales and Northern Ireland unless stated, depend on your individual circumstances and can change. The worked examples ignore investment growth, charges and inflation, and are arithmetic rather than forecasts. The value of investments can fall as well as rise, and you may get back less than you put in. Do your own research, check the official guidance, or speak to a regulated financial adviser before making any decision.

If this comparison was useful, follow for another sourced side-by-side each week.