MSE News: Budget 2016: Lifetime ISA to launch with 25% state bonus for the under-40s

diamonds

jamesd wrote: »

No significant political party has any proposal to abolish the state pension and the current one while in coalition introduced the triple lock that has increased its value. Please cut out the baseless scaremongering.

A government can also seize all private property in the UK but that isn't going to happen either.

Money in a LISA can be withdrawn at any time. A government can't usefully privatise something that has nothing in it. If you want to scaremongering, pick pensions where you can't just take out the money at any time until age 55, but even there you can currently use QROPS to move the pension abroad.

Yes, it's not the best choice for those with a low expected income in retirement because they will get pension tax relief but pay no income tax on the way out under current personal allowance rules.

A vote winner for upcoming and current blue rinse brigade, pensions will go the way of NHS England, Tories sell everything, buy shares and the rest of us pay more for the same service out of tax afterwards, look at history (labour go the the other way and built debt with a lack of control, again look at history).

This is a private state pension (the bonus a tax refund on the saved amount and a bit more (or less depending on each individual NI lifetime contributions), the government owns the bonus payments and any 5% fee and that can be offhived to a holding company and sold by whatever chancellor, of course knowing the rules maybe changed by him the following budget and the new owner get for example staggered % on age of cash withdrawl.

Anybody who thinks a pension of any kind who cannot pay in £500 a month until retirement is best in a LISA over self control is living unrealistic that the governments of the next 20 years minimum will look after them in retirement with the state pension intact, never mind this second private state pension.

Pension rate and credits? In twenty years, doubt it. At one point in the next twenty years expect your homes value to play a part of your pension fund on retirement and state pension entitlement just as it is for council tax today. The most cash/asset stretched will get some help ontop of a Workplace Pension (or whatever name its has been changed several times by retirement age) from the DWP (or whatever gov dept it is moved and rebranded to then) but it will be means tested on cash and any heritable asset.


Any chancellor between a 18 year old (or older) starting a LISA and 60 (as will be current) is again at any future chancellor mercy for age requirements, contributions, it could be sold off, it could be classed as a second state pension in another guise ie what LISA is a private state pension, state pension abolished, top ups of work place pensions will become norm by DWP or by then the local authority social work.


You only have to look at the historical things in thos country...pension market from the 70s onwards to know most people of demograph are screwed by chancellor changes, changes, changes and only the disposable income rich do really well with changes (usually Tory).


Low expected retirement income? yes thats one small part for today and the near future - currently (as has always been) its the low current income that is the BIG issue, add the financial climate, austerity... to actually pay in to private or LISA, why does the DWP want employee pensions ? it is not because the state pension will be triple locked or even there.



LISA is a gamble, the easy thing to screw anyone out of by changing anything is a lifetime savings known as pension. And every government will continue doing such screwing to raise tax revenue, its only the very cash rich paying in high monthly that ever escape more comfortable.


Much better building a property profile, incōme now, sell assets on retirement age you set. Use LISA as a step on that property ladder...a minimum 20 years on a property with HTB/LISA start up will always be more secure, a massive more untaxable profit than a pension for retirement where you miss all the pension changes and income tax on retirement pension, esp as it looks like state pension will be means tested. Why you think buy to let became popular ? Own pension, avoid the pitfalls of governments and chancellors over same period as building a portfolio in a non company to sell for tax free self controlled and funded pension retirement, you paid tax before retirement on rental income at 20/40% - tax rates by norm always go up more than they ever come down by large percentages, by retirement for me in twenty plus years I expect tax to be 30% basic max, well I'm not paying that, I'm paying tax now on my pension via rental income on my profit as income tax (well I will be after my first starter renovation property)


Trust the government to provide my comfortable retirement directly or via a private pension and all its twenty year changes and then taxed on it? No ta... its a false economy that makes them revenue over me, not me

DonM

There is a lot of cynicism, perhaps justified, but we have to go with the rules at the time rather than speculating. Admittedly, it does look bleak with the governments of all hues tinkering with the pensions systems (I include lifetime ISAs (LISAs) here). What can someone of 39 let alone 18 expect when they reach retirement (at least 20 years away using LISAs). Pensions benefit from employer contributions but are continuously are attacked, will the 25% uplift remain on an ISA etc. Property is no better - it's arguably an easier target since it can easily be taxed (reducing tax relief to basic rate for buy to let is the start, introducing a land tax, freeing up building regulations, etc).

So, for me, if you are saving towards a property then LISAs make sense with the 25% uplift. Should you be saving towards retirement and your employer contributes and allows salary sacrifice etc then that makes sense. I suppose the decision on what you should do all depends on how sceptical you are. In the end we have to make a choice and taking control of retirement by not relying on the state (more than strictly necessary) is the route I follow by investing.

Dan83

I don't see what the big deal is about this, obviously it's ideal if your on secure employment that is guaranteed until you retire. Most of us arnt so if you save the max for 5 years you will have saved £20k + £5k bonus, you then get laid off, can't claim benefits because you have savings, if you take your saving out to live on you loose your bonus.

No thanks, I'll enjoy my money now thanks.

bowlhead99

Dan83 wrote: »

I don't see what the big deal is about this, obviously it's ideal if your on secure employment that is guaranteed until you retire. Most of us arnt so if you save the max for 5 years you will have saved £20k + £5k bonus, you then get laid off, can't claim benefits because you have savings, if you take your saving out to live on you loose your bonus.

Nobody under 40 is on secure employment that is guaranteed until they retire.

However, everyone needs money while retired because they will probably struggle to find gainful employment between the ages of 60 and 100+ and presumably they don't want to try to live on a small state pension just above the poverty line for multiple decades.

So, you should be putting money away for retirement age AND putting money away for "what happens if I get laid off and can't get a new job quickly" AND for other known expenses like buying a house or a car or a new washing machine or whatever.

In the past, putting money into a private pension (over and above the amount you already put into the pension scheme your employer offers, which might not be enough for a very comfortable retirement), was a sensible thing to do to support your retirement, because the government would give you tax relief. £80 of net pay became £100 in a pension.

The downside of putting money into a pension scheme to get the tax relief (free money) was that it was locked up until you got pretty old. If you needed it because you realised you had been a bit ambitious and really needed the money in an emergency, it was tough luck, wait until you're older.

If you planned to buy a house at some point, you would have to compromise between how much to put into the pension arrangement for free tax relief money, and how much to put into your house savings pot (missing out on tax relief).

Now with the new scheme you can still do traditional pension if you want (with potentially higher tax relief if you are a high rate tax payer), and accept a long lock-up of your money... or you can do one of these lifetime ISAs where the £80 still turns into £100 but if you urgently need it back because of bad planning or bad luck, you can get at some or all of it with a penalty (and no penalty if the purpose is to buy a first home).

The ability to access it early basically gets you pension-like bonuses and tax benefits but with a safety net (the safety net is discouraged by having a penalty, but it's there if you need it).

You're not forced to use traditional pension or lifetime ISA at all, and you could split your money and do both of you prefer, or neither.

No thanks, I'll enjoy my money now thanks.

That suits me, as your spending the money now will help prop up consumer spending levels and make more profits for all the companies that the rest of us are investing in through our pensions and lifetime ISAs. So there will be more growth to go round for all of us - except you because you chose not to invest for your future and just spend it instead.

Meanwhile we'll keep the free money that was offered to you, because you didn't want it, which will help keep my taxes down.

Then when you have nothing to live on in retirement you can just have the poverty-level means tested benefits, and realise that they are not going to give you a very comfortable last 30-40 years of your life, so perhaps you'll kill yourself to end the misery and we'll save money on benefits and healthcare and bus passes and state pension and whatever else you would have wanted as an OAP.

Sounds like a good plan, well thought out.

Dan83

I've got a pension, I won't be on the poverty level as some pensioners are or will be but I won't be able to live like I do now. Hopefully I'll be mortgage free and my children will be grown up and supporting myself, so hopefully with the bit of money in saving else where, I'll be fine.

People should not be penalised for wanting there money back, some things in life can't be controlled, I don't have a crystal ball, I've never been out of work, but I will be 1 day possibly through no fault of my own, why should anyone be penalised for accessing their rainy day fund.