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  • FIRST POST
    • Hondaguy
    • By Hondaguy 13th Jul 17, 7:42 PM
    • 2Posts
    • 13Thanks
    Hondaguy
    Confusion over Lisa v Pension debate
    • #1
    • 13th Jul 17, 7:42 PM
    Confusion over Lisa v Pension debate 13th Jul 17 at 7:42 PM
    I have a matched contribution based pension with my employer but it's only the statutory minimum. I want to invest more and when the LISA was announced I thought this would be a great way to have a secondary nest egg on top of my pension.

    Furthermore, to this I've always wanted to invest in funds so I thought this would be a great way to start as the 25% bonus would potentially offset any losses in the first year of investment if I picked some bad ones. I've already set the LISA up with Hargreaves.

    The only problem is when I have googled information I have read many articles saying 'pension v Lisa what's best' implying its one or the other.

    Excuse me if this is a stupid question but am I right in saying there is no reason why I can't have a stocks and shares LISA and continue with my pension scheme with my employer?

    NOTE: I am well aware of the fees if withdrawing early, the risk of loss with stocks and shares, and that the government won't give 25% from age 50 onwards.
Page 1
    • kidmugsy
    • By kidmugsy 13th Jul 17, 8:14 PM
    • 9,367 Posts
    • 6,142 Thanks
    kidmugsy
    • #2
    • 13th Jul 17, 8:14 PM
    • #2
    • 13th Jul 17, 8:14 PM
    am I right in saying there is no reason why I can't have a stocks and shares LISA and continue with my pension scheme with my employer?
    Originally posted by Hondaguy
    Correct. Moreover you could withdraw money from the LISA at 60 and contribute as much of it as is then allowed into a pension, thus exploiting the tax advantages of each. Hurray!
    • ricky_v
    • By ricky_v 13th Jul 17, 9:36 PM
    • 233 Posts
    • 115 Thanks
    ricky_v
    • #3
    • 13th Jul 17, 9:36 PM
    • #3
    • 13th Jul 17, 9:36 PM
    Assuming you're getting NI relief as well as tax relief from your employer's pension scheme then that's a 32% relief (if basic rate), plus currently you can withdraw 25% of the pot tax free and anything thereafter is subject to the normal income tax, where the first £11,500 (currently) a year is tax free.

    LISA (if used for a pension) gives a 25% contribution on taxed income, but is tax free when you draw down.

    A LISA is only good for people who earn below the tax free allowance, or self employed paying basic rate of tax, or PAYE employees who cannot salary sacrefice any more of their wages/at the pension pay in limits, or if you haven't bought your first property yet.

    Moreover you could withdraw money from the LISA at 60 and contribute as much of it as is then allowed into a pension, thus exploiting the tax advantages of each. Hurray!
    My understanding is that you're not exploiting the tax advantages of a pension by using LISA money to pay into it, as LISA money is already taxed?
    • number_monkey
    • By number_monkey 14th Jul 17, 12:30 AM
    • 4 Posts
    • 3 Thanks
    number_monkey
    • #4
    • 14th Jul 17, 12:30 AM
    • #4
    • 14th Jul 17, 12:30 AM
    Correct. Moreover you could withdraw money from the LISA at 60 and contribute as much of it as is then allowed into a pension, thus exploiting the tax advantages of each. Hurray!
    kidmugsy - doesn't this rely on the government not changing the tax treatment of pensions over the next 20+ years (which frankly seems very unlikely)?
    • bigadaj
    • By bigadaj 14th Jul 17, 5:57 AM
    • 9,349 Posts
    • 5,977 Thanks
    bigadaj
    • #5
    • 14th Jul 17, 5:57 AM
    • #5
    • 14th Jul 17, 5:57 AM
    kidmugsy - doesn't this rely on the government not changing the tax treatment of pensions over the next 20+ years (which frankly seems very unlikely)?
    Originally posted by number_monkey
    Well you can only go on what you know and the current situation, politicians can and will do anything in the future.

    Little has changed on the tax treatment of pensions over the last twenty years, from an accumulation perspective at least. There's always talk, particularly of higher rate relief being withdrawn, but that has been discussed for decades as well.
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