Lifetime ISA - 1 year on..

adonis10

So, I am sat here considering a last minute foray into the LISA market but cannot get the doubts out of my head.. Well, the doubts are those that come from the fairly negative press and low take up that has surrounded the product.


My 72k of savings and investments are split as follows:
- 20k workplace pension (total contributions of 29%/month)
- 10k s&s ISA invested in VG LS 80 and 100
- 5k premium bonds
- 37k in higher interest current accounts and regular savers


I have a low mortgage (£141k on a £360k property) and so do not feel that I would need the 4k before retirement, however I am put off by all the negativity surrounding the product.


With only a day left to benefit from £1k top up for 2017/18, advice needed......

eskbanker

If you're contributing 29% of salary to a pension then that seems reasonably well covered, although if the pot is only £20K so far then this presumably hasn't been going on for long yet?

If you're minded to invest in S&S ISAs already then why not do so with an extra 25% government contribution (in return for committing the money for a longer period)? Ignore perceived negativity and low take-up - it's all about what's right for you in your own personal circumstances....

bowlhead99

I'd agree; given your decent rate of pension contributions you may find it more difficult than some to be able to draw your pension out within the boundaries of your annual personal allowance without displacing other income, so having a LISA investment balance that you can dip into from age 60 - with no restrictions at all on how much per year you take out of it - seems like it would be quite handy.

TheLastMongoose

Media coverage/gossip can be confusing. Do you have any specific concerns or questions? The low uptake is understandable as it quite a specific product that will only be of benefit to certain types of people. LISA's are most appropriate for basic rate taxpayers, if you earnings are higher then pension tax relief can be better than the 25% bonus. If you are a basic rate taxpayer, have the money to invest long term and want to save to complement your pension then I don't see what's to lose. That's why I have one!

adonis10

EJS_Superted wrote: »

Media coverage/gossip can be confusing. Do you have any specific concerns or questions? The low uptake is understandable as it quite a specific product that will only be of benefit to certain types of people. LISA's are most appropriate for basic rate taxpayers, if you earnings are higher then pension tax relief can be better than the 25% bonus. If you are a basic rate taxpayer, have the money to invest long term and want to save to complement your pension then I don't see what's to lose. That's why I have one!

Fair points.


Basic rate tax payer (33k salary) and never likely to be higher rate so I think it may be beneficial for me.

TheLastMongoose

Now you just have the equally confusing job of choosing a platform! :undecided

adonis10

As I am getting the maximum contribution from my employer I guess my next question is would I get tax relief on AVC payments into my pension? If so, is it only relief on income tax, meaning that this option is inferior to the 25% government contribution into a LISA? As such, would the LISA not be more beneficial than writing a £4K cheque and sending it into my pension?

eskbanker

adonis10 wrote: »

As I am getting the maximum contribution from my employer I guess my next question is would I get tax relief on AVC payments into my pension?

Yes, subject to annual (and lifetime) allowances.

adonis10 wrote: »

If so, is it only relief on income tax

Yes.

adonis10 wrote: »

meaning that this option is inferior to the 25% government contribution into a LISA?

Not necessarily, it's the same at initial face value: starting from £1 of gross income, you could put the net 80p into a LISA where the 25% bonus would take it back to £1, or you could contribute to a pension where the tax relief would, er, take it back to £1! However, LISA money won't be taxed on withdrawal, whereas at least some of pension proceeds might be....

adonis10 wrote: »

As such, would the LISA not be more beneficial than writing a £4K cheque and sending it into my pension?

Not necessarily, it's quite a nuanced comparison depending on individual circumstances - have a read through some of the 'LISA versus pension' threads such as https://forums.moneysavingexpert.com/discussion/5794388

ricky_v

adonis10 wrote: »

If so, is it only relief on income tax,

eskbanker wrote: »

Yes.

If the contributions are from source (salary sacrifice) then there's additional NI relief of 12%, Making to total relief of 32% for a basic rate tax payer.

If that's the case then it's most definitely worth opting for additional contributions to your workplace pension than a LISA.

adonis10

ricky_v wrote: »

If the contributions are from source (salary sacrifice) then there's additional NI relief of 12%, Making to total relief of 32% for a basic rate tax payer.

If that's the case then it's most definitely worth opting for additional contributions to your workplace pension than a LISA.

I can't up my contributions until June and even then I'd only up it by about 5% monthly so wouldn't be able to commit the whole 4K.

ricky_v

I would up it more than 5% and use the £4k from June until June next year to replace the lost salary.

£1k bonus instantly on £4k is instant and obvious, £1280 bonus on £4k through reduced tax and NI payments over the year is a little less obvious and exciting .