LISA or no LISA

boombaba

im thinking about using the LISA to boost pension savings.

I am self employed so do not get employer contributions, my only worry with the LISA is the age of 60 to withdraw the money with the bonus could be moved in the future, the alternative is just to keep the money in an ISA (which is not much of an alternative) what are people thoughts on the goalposts being moved in the future?:j

dunstonh

I am self employed so do not get employer contributions, my only worry with the LISA is the age of 60 to withdraw the money with the bonus could be moved in the future,

Yes it could. Just as the pension minimum availability age of 55 could be moved.

the alternative is just to keep the money in an ISA

Or a pension. The pension could be more tax efficient for you than the LISA at the front end. Although the LISA could be more tax efficient at the back end. It depends on your circumstances.

what are people thoughts on the goalposts being moved in the future?

Crystal ball. More likely that the LISA will be abolished at some point I suspect as there is too much overlap with pension. Or maybe pensions will be abolished. Who knows.

boombaba

great thanks for the quick response.

i already pay the maximum i can pay in being a basic rate tax payer to the pension to get the governments 20% relief.

I was thinking about topping this up with the LISA. Thats surely better than putting it in a ISA yeah? :T

dunstonh

i already pay the maximum i can pay in being a basic rate tax payer to the pension to get the governments 20% relief.

The annual allowance for a pension is 100% of your gross profit to a maximum of £40,000 (with the potential for carry forward to use unused allowances from previous years).

Are you really paying as much as that in?

boombaba

hmm maybe i worded that wrong. i got told i am allowed 2400 to get 600 top up. anything above that is do not get it topped up so i pay 2400 only per annum in pension to make a total 3000 ? :eek:

jimjames

boombaba wrote: »

hmm maybe i worded that wrong. i got told i am allowed 2400 to get 600 top up. anything above that is do not get it topped up so i pay 2400 only per annum in pension to make a total 3000 ? :eek:

Do you have any earnings? If you're self employed presumably you are making some money and paying tax? £2400 is only for non taxpayers

bowlhead99

boombaba wrote: »

I was thinking about topping this up with the LISA. Thats surely better than putting it in a ISA yeah? :T

If :
1) you are definitely not going to want to touch it before age 60 (if you were, an ISA would be better); and

2) you are not going to be a higher rate taxpayer at some point in the future (if you were, using an ISA now and moving it into a pension when you become a higher rate taxpayer later, is better); or

3) you have never owned a property and would use the LISA to get on the property ladder using the free bonus money

Then yes using a LISA seems better than other options.

The window of 20+ years from age under 40 to age over 60 is a long time, and so if you don't expect to have any long term savings or investment ambitions that need funding in that time period you might be unusual. Many people would look to use 'traditional' S&S ISAs which can be accessed penalty-free during that time, before they took on a LISA which can't be accessed without penalty.

If you definitely wouldn't need 'emergency' access, a bit more pension might be useful due to the current rules allowing an eventual earlier access age, although being able to pay a penalty and access it in an emergency if you had overcommitted to your pensions and LISA is a good 'defensive' feature compared to a pension.

Of course if you don't have a property yet, then LISAs are great, free cash to invest into a home, no brainer.

boombaba

i am entitled to seafarers so my allowance is under the earnings threshold hence the £2400 max im allowed to pay in.

This is why I am thinking LISA would be good for me as I do not get any more tax relief if I increase my pension contributions.

dunstonh

boombaba wrote: »

hmm maybe i worded that wrong. i got told i am allowed 2400 to get 600 top up. anything above that is do not get it topped up so i pay 2400 only per annum in pension to make a total 3000 ? :eek:

No. Even non earners can pay more into a pension than that. The non earner limit is £3600. Earners are 100% of earnings (subject to the £40k cap)

boombaba

I have a property already,

I was thinking about either investing in S&S ISA alone or investing in S&S ISA and LISA. I would prefer access of course but the benfit of getting a potential £1000 per year without interest is quite attractive. The standard S&S ISA would have to go a long way to outperform.

boombaba

apologies

tax relief at 20% on pension contributions of £2,880 a year (which will be grossed up to £3,600).

thats what i pay now...