Lisa v SIPP Higher Rate taxpayer

toothdoctor

Hello my money saving friends
Been many years reading these threads gaining knowledge but this is my first time being an OP so be gentle. I know this topic has been discussed before but I just wanted people’s opinion on what you would do in my situation regarding the purchase of a SIPP or LISA.
I am a 37 year old dentist working within the NHS system so contribute to the NHS pension (CARE) scheme (and have been since I qualified aged 23). I was part of the 1995 scheme but was automatically moved to the 2015 scheme (not as good). The benefits accumulated in the 1995 scheme will give me an income of roughly 10k pa at 60 but will have to wait until state pension age to claim my benefits of the 2015 scheme. I am looking at ways of boosting income at 60 until state pension age so was looking at a LISA or a SIPP. I am a higher rate tax payer so the extra tax relief of the pension appeals. The only advantage I can see with the LISA is that as a last resort (and paying a big charge) you can get your money out before 60 (however I hopefully won’t need to withdraw). I was thinking I will start with Vanguard lifestrategy/retirement funds via HL and add other as I go along and become a bit more confident.
Many thanks in advance

Alexland

I don't really see it as a realistic advantage to paying the LISA early withdrawal penalty. Plan your life ahead and build accessable wealth alongside your retirement provision in parallel. If you are paying higher rate tax then the pension will beat a LISA unless you expect to have lifetime allowance issues. If your investments do really well you might want money accessible for the late 50s too.

Zorillo

I guess a reason for paying the LISA early release fee could be if something catastrophic has happened, like you're house burns down and the insurance won't pay out.

+1 for pension, unless the OP can reasonably expect to need the money before 55, in which case perhaps neither option is a good idea.

Herbalus

Is a Lisa withdrawal taxable as income? That could be another consideration?

toothdoctor

Thanks all. Think I will invest via a SIPP to get the extra tax relief to reduce my Jan/July tax payments. Maybe worth opening a LISA with a couple of quid to give me options as if I don't open before 40 will lose the chance forever.

BLB53

You should not discount the S&S ISA as you can put away £20K each year and when you decide to take income it will all be tax free.

adindas

I wonder is VLS retirement funds is a SIPP ??
WHat is the difference with Other VLS product such as VLS 80 with VLS retirement funds??
Thanks

Alexland

adindas wrote: »

I wonder is VLS retirement funds is a SIPP ??
WHat is the difference with Other VLS product such as VLS 80 with VLS retirement funds??
Thanks

Vanguard Target Retirement funds should really be called Vanguard Target Date funds as they reduce the equities ratio significantly in the expectation of a withdrawal event such as buying an annuity. Many investors are choosing to go into drawdown in which case they can take more risk for longer so while they might still want to reduce risk it might be targeting a 60/40 balanced mix with a couple of years cash buffer in retirement.

I wonder how many drawdown investors are questioning their withdrawal rate and if/when they should start using their cash buffer following the recent market correction.

Alex

toothdoctor

Yes I have a S&S ISA with Orbis (took the matched £100 offer that was flagged up by Alexland-thanks). I also have a cash buffer which is sitting in my offset account (but eventually could be transferred into S&S ISA as the mortgage balance reduces). However money going into the S&S ISA has already been taxed so no tax relief. My understanding is that when I contribute to a pension I get tax relief at source (20%) and then a further 20% via my SA tax return. When I come to take my pension hopefully I will be a lower rate tax payer and only pay 20% income tax (after 25% lump sum). Of course assuming the same tax rules apply in 23 years time as they do today. So would you recommend a portion in the VLS retirement fund or just VLS 80/HSBC/Blackrock etc, Could always have a mix of a variety (just gets more expensive if I want to transfer to a different provider in the future). Thanks all

Mistermeaner

Sorry if hi Jack but thus thread got me thinking - does the fact the op has a db pension reduce the amount he can pay annually into the sipp .... Ie is some of the 40k consumed by a calculation of db benefit

On the assumption the db is quite generous I would assume it should take a lot of the 40k

I know db is considered as part of the life time allowance (at far too low a rate IMO penalising DC payers disproportionately

MDMD

Mistermeaner wrote: »

Sorry if hi Jack but thus thread got me thinking - does the fact the op has a db pension reduce the amount he can pay annually into the sipp .... Ie is some of the 40k consumed by a calculation of db benefit

On the assumption the db is quite generous I would assume it should take a lot of the 40k

I know db is considered as part of the life time allowance (at far too low a rate IMO penalising DC payers disproportionately

It’s a complex area as the AA is used up by the increase in benefits in the DB scheme

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/the-annual-allowance