Pension, Lifetime ISA for a self employed individual...What are the options

trevstonbury

Hello,

Within the last year I've become self employed and am in the basic rate tax band. I've always paid in through a pension with my employer but obviously I don't have one anymore. Can someone advise on what the best options are? Id like to get something setup as soon as possible but don't really know where to start....

Kind regards

Trevor

MallyGirl

Hi

are you under 40?

Marcon

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kidmugsy

Are you truly self-employed or are you working for your own limited company?

trevstonbury

Hey Guys,

thanks for all the quick responses. In answer to your questions, yes I am under 40 and yes I am truly self employed, no limited company.

kidmugsy

As a (very rough) guide: if you become a higher rate taxpayer then a pension would, in most circumstances, be more attractive than a LISA.

If you pay at the basic rate then in your shoes I'd give the LISA serious consideration. (At the very least open one so that you keep your options open to age 50).

With a LISA you add up to £4k per tax year and the taxpayer adds a bonus of 25% (therefore up to £1k per tax year). You can draw the money out TAX FREE from age 60. If you need it in the interim then (with a few exceptions) there's a penalty to pay of 25%, which is enough to sting but isn't draconian. You can keep contributing until you are 50.

If the tax relief for pensions changes so that they become more attractive then you could simply reduce your contributions to the LISA and divert your money to a pension.

If, by any chance, you have never owned residential property but are considering buying some then the LISA wins because you can withdraw money tax-free to spend on your property purchase. Though that would still leave you needing to save for retirement.

trevstonbury

Thanks for all your help guys, will look into the LISA!

skater_kat

sorry to hijack - can i ask the same question on behalf of my partner please. she is 43 years old, self employed but via a Ltd company - but we are only talking about 15k a year or less (varies year to year); basic rate taxpayer. no savings. she has one private pension pot from about a decade ago of around 10k, with aviva. should she restart contributions to that or start something new? neither of us have a clue tbh.

dunstonh

she is 43 years old, self employed but via a Ltd company

That means she is not self employed. She is a 100% shareholding director.

should she restart contributions to that or start something new?

It would require an analysis of the existing scheme vs alternatives to say which is best. Either would be better than nothing.