LISA as additional retirement fund

Alexland

Yes a DC scheme with no fees is unusual and might not continue forever. The 25% tax free might get cut back or tax rates might rise. Just imagine if they merged income tax and national insurance for pensioners! But then the LISA might even be counted towards the LTA in future. So difficult to make decisions with certainty...

An alternate path would be to just hedge bets and put half the money in the DC and half in the LISA?

From me I am doing a LISA as I have already contributed enough into my pensions during my 20s and 30s that with modest growth above inflation it would use up around 50% of an inflation adjusted LTA limit at 60. It's hard to know how much more to contribute as I head towards 40s and 50s.

Alex.

Southend1

kidmugsy wrote: »

I think your scheme is pretty good. Assume that in real terms your £48k + USS DC grows to £80k. Take £20k tax-free and draw down the other £60k at £12k p.a. for 5 years. There's your personal allowance used up. Then you'd want the LISA to cover you for the extra income you need, also tax-free.

I wouldn't be at all surprised if USS goes through more turmoil and closes the DB section to new accruals, switching entirely to DC for new contributions. I don't see any reason why that would necessarily change your plan. Perhaps if higher rate tax relief were swept away, and everyone got the same relief at more than basic rate, that might incline you to contribute more to a pension and less to a LISA.

A LISA is available in an emergency albeit with a penalty. The DC money would be available in an emergency but only once you are 55 (or whatever the magic age is by then). So there is a case for saving into the LISA now rather than making the unmatched DC contribution, expecting to move to further DC contributions in your 50s.

Happily, whichever you opt for is attractive and you can change your mind as the situation changes. My own instinct might be to go for the more flexible option (LISA) to begin with. Why not wait for this month's Budget and then grasp the nettle?

Thanks. Food for thought there, for sure.