SIPP or LISA?
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Caulder
Posts: 3 Newbie
Hi,
I'm currently 25 and wanting to know what would be best. I receive a good workplace pension where I contribute 3.5%, and my employer contributes 10%. Doing some calculations over the last few weeks, even if I stayed on the exact same salary for the rest of my career (not possible, as after year 5 we have annual pay rises agreed with our union) and working on 5% growth it looks like I'll go over the £1m threshold.
At the moment, my thinking is, at retirement, to take 25% tax free and use the rest for either an annuity or some kind of drawdown scheme (I plan to seek independent financial advice for this nearer the time). I am now considering whether to start a SIPP or a LISA, as I'd like to maximise the amount I have available, or even have the option to retire early should I so want to.
Should I start a SIPP, or max out my LISA each year? I'm leaning more towards the LISA as I can take all the cash tax free at age 60, I can't foresee needing the money before then. I already invest into an S&S ISA, and cash into a H2B ISA. I would be, within the next few years at least using my full £20k allowance, either all into my S&S ISA, or split £16k into my S&S ISA and £4k into the LISA.
Sorry if I've not been very clear, I'm essentially just looking for the best way to make my money work!
Edited to add: I'm a higher rate taxpayer, but below 100k.
TIA
I'm currently 25 and wanting to know what would be best. I receive a good workplace pension where I contribute 3.5%, and my employer contributes 10%. Doing some calculations over the last few weeks, even if I stayed on the exact same salary for the rest of my career (not possible, as after year 5 we have annual pay rises agreed with our union) and working on 5% growth it looks like I'll go over the £1m threshold.
At the moment, my thinking is, at retirement, to take 25% tax free and use the rest for either an annuity or some kind of drawdown scheme (I plan to seek independent financial advice for this nearer the time). I am now considering whether to start a SIPP or a LISA, as I'd like to maximise the amount I have available, or even have the option to retire early should I so want to.
Should I start a SIPP, or max out my LISA each year? I'm leaning more towards the LISA as I can take all the cash tax free at age 60, I can't foresee needing the money before then. I already invest into an S&S ISA, and cash into a H2B ISA. I would be, within the next few years at least using my full £20k allowance, either all into my S&S ISA, or split £16k into my S&S ISA and £4k into the LISA.
Sorry if I've not been very clear, I'm essentially just looking for the best way to make my money work!
Edited to add: I'm a higher rate taxpayer, but below 100k.
TIA
0
Comments
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I'm currently 25
Its far too early to worry about the LTA figure as it is in 2018.
The LTA exists for historical reasons. By the time you hit retirement, those historical reasons will be dead. So, the need for an LTA will be gone. If it still exists as you get closer, then worry about it then. It probably wont exist when you get there.
Pension trumps LISA in your scenario.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Certainly additional contributions into your workplace pension would beat a LISA if you are a higher rate taxpayer. You could do a SIPP but then you would need to claim some of the tax back via self assessment.
Depending on your income once you have paid enough into your pension to avoid higher rate tax (subject to the annual limit and any carry forward allowance you may have) you might find yourself a basic rate taxpayer on your remaining income. In which case a S&S LISA might make sense especially if your employer doesn't operate salary sacrifice.
Alex0
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