What's the Smartest Way to Save in 2025?

Summary

Merryn Talks Money – "What's the Smartest Way to Save in 2025?"

Date: May 27, 2026
Host: Merryn Somerset Webb
Guest: John Stepek (Senior Reporter, Money Digital Author)
Theme: Deep dive into Lifetime ISAs (LISAs), SIPPs, and ISAs—untangling which is smartest for savings in 2025

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Episode Overview

This episode tackles the perennial confusion among UK savers: LISA, SIPP, or ISA? Merryn Somerset Webb is joined by John Stepek to critically re-examine the pros, cons, and intricacies of each savings vehicle—especially Lifetime ISAs (LISAs)—following robust listener feedback and nuanced, practical examples. The hosts discuss how the products compare for different taxpayers, the impact of recent policy and tax changes, and why the best path often depends on your age, income, and long-term plans.

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Key Discussion Points & Insights

1. Revisiting LISAs: Listener Pushback and Praise

• Background: Previous skepticism from the hosts toward LISAs led to a flood of detailed listener emails defending their use.

• Listener James’s Argument:

  • The 25% government bonus on up to £4,000 a year is “almost immediate,” essentially giving you a return on £5,000 from day one.

  • Over a working life, this can amass to substantial sums (~£34,719 extra available at retirement, per his calculations).

  • James recommends the order: First, fill up your SIPP for tax relief; then LISA (£4k/year); then regular ISA.

    “You get a 25% return almost immediately on a £4,000 annual basis … so then you’re effectively making the return on five grand for the full year… an additional £34,719 available in your LISA for use in retirement.”
    — Listener James (paraphrased by Merryn, 03:00–04:30)

• LISA Eligibility and Rules Recap:

  • Can be opened until age 40; contributions allowed until 50.
  • Use for first home (up to £450,000) or take out tax-free at 60; withdrawal for other uses triggers a penalty.

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2. LISA vs. SIPP vs. ISA: Comparing the Mechanics

• Listener’s Second Point:

  • LISAs may be more tax-efficient than SIPPs for lower-rate taxpayers because:

    • Whole pot is tax-free at 60, versus SIPP’s 25% lump sum plus marginal tax on the remainder.
    • Tax-free status of LISA contributions is, some argue, politically safer—less likely to be “fiddled with” compared to pension rules.

  • Non-taxpayers can contribute more to a LISA (£4,000 vs. restricted SIPP allowance).

    “He reckons that LISA is more tax efficient, particularly for lower rate taxpayers, than a pension… also says that he thinks the tax free status of past contributions to a LISA looks more secure to me than that of a SIPP.”
    — Merryn Somerset Webb (05:33–06:08)

    “With serious ill health, you can access your LISA penalty-free. And in extremis, you can access the funds at any time with that 25% penalty.”
    — Merryn (06:18)

• Penalty as Discipline:

  • The withdrawal penalty can actually help keep young savers focused, discouraging the temptation to dip in for short-term desires.

    “This penalty can actually be a good thing for young people… as it stops them dipping into their pot for holidays, etc. So in that sense, it’s better than an ordinary ISA.”
    — Merryn (06:27–06:37)

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3. Hosts Reflect: Were Their Initial Judgements Unfair?

• John Stepek:

  • Acknowledges the validity of the listeners’ points, especially for low-rate taxpayers and for using LISAs for non-earners (spouses/kids).

  • Highlights the issue of “political risk” and the fact that ISAs/LISAs are more “yours” psychologically and, perhaps, in practice.

  • Using the maximum allowable annual contributions across vehicles can be a sophisticated (if administratively complex) savings strategy.

    “That’s a particularly good point about the political risk… and also the fact that you can take the whole thing out tax free whenever you’re 60 as you only get the 25% lump sum on the SIPP. So, yes, we were probably a little bit harsh.”
    — John Stepek (07:11)

    “If you’re paying into a kind of pot for your spouse who’s a non-taxpayer or your kids, you can only put £2,880 into a SIPP… but you could put the full £4K into a LISA.”
    — John Stepek (07:26)

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4. Complexity and “Fiddliness”: The Real Drawback?

• Saving Tactics Demand Attention:

  • Layering allowances across several vehicles can bring real returns—but at the cost of much admin and ‘fiddly’ strategy.

  • There’s a “Martin Lewisness” (00:49, mildly teasing) about trying to game every rule for maximum gain: worthwhile, but potentially time-consuming.

    “There’s a slight… the Martin Lewisness about the whole thing of, ‘Okay, you need to, in this order, and you need to kind of fill this one up a bit… then compare the…’ You kind of spend an awful lot of time to save… but as to whether you can be bothered is something to take into account!”
    — John Stepek (08:49–09:13)

  • Merryn: “We hate fiddles, hate fudge, hate admin.” (08:45)

• Potential Payoff:

  • For truly motivated savers, getting it right can mean “£34,000... it’s a cruise, John. Many cruises!” (Merryn, 09:24)
  • The size of the prize might justify the hassle for some.

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Notable Quotes & Memorable Moments

• On LISA for Non-Taxpayers:

  “If you’re paying into a pot for a non-taxpayer, you can only put £2,880 into a SIPP… but you could put the full £4K into a LISA.”
  — John Stepek (07:26)

• On Political Risk and Perception:

  “LISAs… are very much theirs… Whereas SIPPs and pensions, it’s a smaller port.”
  — Merryn / John (06:10–06:12)

• On Administrative Fiddlyness:

  “We hate fiddles, hate fudge, hate admin.”
  — Merryn (08:45)

• On the Prize:

  “£34,000… it’s a cruise, John. Many cruises. Three months on a Disney cruise ship. I gather adult Disney is a thing.”
  — Merryn (09:24)

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Timestamps for Core Segments

| Segment | Timestamps | |-----------------------------------------------|-----------------| | Welcome & Episode Theme | 01:47–02:07 | | Recap: Last Episode & Listener Mail | 02:07–03:45 | | Listener James on LISA Strategy | 03:45–04:50 | | LISA vs. SIPP vs. ISA — Listener Arguments | 04:50–06:40 | | Political Risk & Non-Taxpayer Options | 06:40–07:30 | | Hosts Reflect on Harshness | 07:30–08:40 | | Complexity & “Martin Lewisness” | 08:40–09:24 | | Light-hearted Cruise Analogy & Wrap-up | 09:24–09:58 |

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Key Takeaways

• LISAs are a viable, sometimes superior, choice for certain savers—especially under-40s, non-taxpayers, and lower-rate taxpayers—with the bonus, tax treatment, and relative political stability offering real appeal. But the age limits and withdrawal rules introduce genuine risk and complexity.
• SIPPs remain strong for higher-rate taxpayers due to immediate tax relief, but their tax treatment at withdrawal and new inheritance tax considerations are making people think twice.
• ISAs are simple, flexible, and well-protected politically—but lack the upfront bonus of LISAs and the tax relief of SIPPs.
• Best approach: Know the rules, maximize each product within the rules, and only be “fiddly” if you stand to gain big from the admin.
• Listener feedback is invaluable—this show remains an open forum for debate and learning.

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If you’ve ever wondered about the best order for your UK savings—LISA, SIPP, or ISA—this episode is an essential listen, packed with real-world examples, expert nuance, and clear-eyed discussion of the trade-offs.

Transcript

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Bloomberg Audio Studios Podcasts Radio News.

[Maren Sumset Webb]

Welcome to Marant Talks yous Money, the personal finance edition of marantalks Money, and these bonus podcasts. We talk about the best strategies for making the most of money. I'm Maren Sumset Webb and with me senior reporter and Money Digital author John Stubberg. Hi John.

[John Stubberg]

Hi man.

[Maren Sumset Webb]

Right. So last week we answered a big pile of questions or attempted to answer a big pile of questions. We get so many really interesting questions and comments coming into the mailbox, which we really, really appreciate. So we spoke about a whole load of topics last week. But this week I really wanted to address the whole ISA Lysa SIP thing because we did a podcast, you and I gosh, I can't remember maybe a few months ago now where we talked about the, the Lysa, the Lifetime isa Lisa Lisa we got. I think we everyone ever, ever agrees on that. Anyway, whatever it is, the Lisa Lisa Lifetime Isa, the one where if you're under 40 you can put, what is it, £4,000 a year and government tops it up by another grant, you get a 25 contribution and so you can contribute until you're, you can open it until you're 40 contribute until you're 50 I think and then you can use it to buy a house up to a value of £450,000. And if you don't do that you can leave it in and then take it out on, on retirement but slightly later than a sip. So I think 60, you can then take that money out and you're and I are a bit like oh well I don't know because you can't take it out until you're 60 so why wouldn't you just use an ordinary sip? And if you take the money out without spending it on a house before you're 60 you lose all the contribution and so you can end up losing a reasonable amount of your own money. And then of course if you don't buy the correct priced house then you also lose money. Yeah, so we talked about this and we're like oh, don't really know about that, doesn't seem, doesn't seem all that. But a lot of people disagree with us so I wanted to just run through some of those emails and explain why some people just think that we're wrong to be sniffy about it and you know, probably we are. I don't know, I just seems to me to be complicated and risky. But anyway, here we go. So here's one from James. He says I really enjoy the show. Excellent. I understand the points that you make. However, anyone under 40 who has bought their first house already should still consider using one. Why? Because you get a 25% return almost immediately on a 4,000 pound annual basis. So it's not like in most things, the return is spread out over the year. It comes to you in a oner. So then you're effectively making the return on five grand for the full year. So the contribution and the top up are literally invested from debt day one and on his sums the net result is an additional 34,719 thanks to the precision James available in your Lisa for use in retirement. So he's made an assumption of returns and if you were to put that return up obviously it would be further and his overall view is that you should put whatever you can into a sip first so you can reduce your high additional tax rate impact and claw the tax back, et cetera of course. And then £4,000 sounds straight into your lysa and then everything else into your isa. I'm interested in that way around because you know, not everyone agrees with that now, now that the sip is not iht efficient. A lot of people have wrote through how much you put into your sip. So that's interesting. Right, onto the next one. And then I'm gonna ask you what you think about all this, John. I've been a fan of you and John Stevik since the Money weekdays and rarely miss a podcast. Excellent. That's what I like to hear. He again is asking about the same thing and he says that he thinks that we've been a little. A little on the Lisa. He said what works for him is that you can take it entirely tax free at 60 years old, unlike with a SIPP, when of course you only get 25% tax free and you have to pay your marginal rate of income tax on the rest. So in that sense he reckons that LISA is more tax efficient, particularly for lower rate taxpayers, than a pension. He also says that he thinks that the tax free status of past contributions to a LISA looks more secure to me than that of a sip. So it's less likely to be fiddled with, which I think we might agree with actually, because we've always said that we think the government will come for ISIS lost because everyone understands ISAs, everyone gets ISIS and everyone feels their ISAs are very much theirs.

[John Stubberg]

Whereas SIPs and PENS, it's a smaller port.

[Maren Sumset Webb]

Yeah. And sibs and pences are a little bit more distant. He also says with serious ill health, you can accept your LISA penalty free. And in extremis you can access the funds and anytime with that 25% penalty.

[John Stubberg]

Yeah.

[Maren Sumset Webb]

So you know, to my mind, this penalty can actually be a good thing for young people using ELISA for retirement savings as it stops them dipping into their pot for holidays, etc. So in that sense it's better than an ordinary assume again. Okay, I'll give you that. I'll give you that. And finally, he says that non taxpayers can only pay £2,880 into a SIPP, but they can add a further £4,000 into a Lisa. Of course we could say, well, you know, you can put 20 grand into an ordinary ISA, but this does give you that tax back. So, you know. Yeah, okay, I get that. And by the way, something that wasn't clear on the podcast, although I think I did say it just now, was that the LISA can be opened until you were 40 and once opened you can contribute until you are 50. So I think good points, particularly for

[John Stubberg]

lower rate taxpayers there, I wouldn't disagree with any of those. And I think that's a particularly good point about the political risk, the Liza, and also the fact that you can take the whole thing out tax free whenever you're 60 as you only get the 25% lump sum on the sip. So, yes, we were probably a little bit harsh. And I actually thought the other point that the latter podcast listener made was that if you're paying into a kind of pot for your spouse who's a non taxpayer or your kids even, you can only put 2,880 quid into a tip which is then grossed up to 3, 6. Yeah, but you could put the full 4K and Eliza. And again, that's effectively a pension contribution with a different kind of like tax status at the end, if you're talking about for a non working person. So that's something I hadn't thought of and actually I think makes quite a lot of sense, you know, so. And yeah, and obviously if you've got these allowances and you've used them all up already, then it is worth, you know, using up. This is an extra chunk. Although it comes off your eyes. It does,

[Maren Sumset Webb]

yeah. Okay, so we were a little harsh. We were a little harsh. I'm not 100% convinced, but I do take all those points. I do take them. We were a little harsh. Yeah.

[John Stubberg]

I suppose the other issue is our dislike of fiddliness.

[Maren Sumset Webb]

Yeah. We hate fiddles, hate fudge, hate admin.

[John Stubberg]

There's a slight and sorry for taking his name in pain, the Martin Lewisness about the whole thing of. Okay, you need to, in this order and you need to kind of fill this one up a bit. Don't put too much in this one. And then compare the, you know, etc. Etc. An element. You kind of spend an awful lot of time to say nothing. God's terrible says. But as to whether you can be bothered is something they take into account here by doing. Those are all reasonable points. And these are bigger sums than just, you know, switching bank account regularly.

[Maren Sumset Webb]

It's not just switching energy provider.

[John Stubberg]

Exactly.

[Maren Sumset Webb]

If the numbers here are correct, which I'm sure they are because our readers are very, very literate. £34,000. It's a cruise, John. Many cruises. Three months on a Disney cruise ship. I gather adult Disney is a thing.

[John Stubberg]

Really. Oh yeah, you just put me right off.

[Maren Sumset Webb]

It's the Norwegian fuels for us, John. Thanks for that everybody. Any more comments on license and isis? Do send them in because, you know, obviously this is a knotty issue. But thanks for all those emails and thank you, John.

[John Stubberg]

Thanks, Bill.

[Maren Sumset Webb]

Thanks for listening to this week's Marin Talks yous Money. If you like our show, rate, review and subscribe wherever you listen to podcasts Also be sure to follow me and John on X or Twitter at mariansw and John underscore Stepeck. This episode was produced by Sama Saadi and Moses Andan. Questions or comments on this show and all our shows are always welcome. Our show email is marinmoneylumberg.net.

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