Additional pension contributions or LISA?

Rails

Hi I am trying to work out the best course of action in terms of planning for my retirement. I am 34 at the moment and would like to take either full or partial retirement at age 60.

I am currently a Civil Servant earning £18,000 a year before tax, I make the minimum standard pension contributions for the Alpha Scheme which is at the moment is 4.6%. The only debt I have is my mortgage, the balance on this is £54,000 & I have a two year fix at 1.54% so my monthly payment is £217.

For a while I have been saving £250 each month & that has built up to savings of £6000. I have worked out that I could afford to pay the full £4000 (£333 per month) into a LISA each year.

I am leaning towards the LISA rather than making additional pension contributions because my normal pension age for my workplace pension is tied to my state pension age which is currently 68 whereas as the LISA would be accessible at age 60.

kidmugsy

That seems a rational plan to me. Do you have an adequate emergency cash reserve?

Rails

Not as such. If I had to pay an emergency bill I guess I would have to rely on using my credit card.

cfw1994

Rails wrote: »

Not as such. If I had to pay an emergency bill I guess I would have to rely on using my credit card.

But you do have £6K in savings, right?
Are you planning to invest all of that into the LISA?
You may want to keep some back....always nice to try to have some accessible cash for unexpected bills....

Rails

Oh yeah I have £6K savings in cash as of right now. I was planning on paying £4000 into a LISA before the end of the current tax year & then another £4000 at the start of the new tax year because if I have understood how the LISA will work correctly I will then get the full bonus at the start of the tax year so it will have longer to grow.

Then I would be saving £4000 each year ready to pay into the LISA at the start of each new tax year.

kidmugsy

Rails wrote: »

Not as such. If I had to pay an emergency bill I guess I would have to rely on using my credit card.

That's an absurdly expensive risk to take. Open a high-interest current account at Nationwide (Flexdirect) and keep £2500 in it, earning 5% p.a. Also open a Flexclusive regular saver, also paying 5%.

Be sure to check the T&Cs before you act.