Pension with Contribution AND Lifetime ISA?

mburrows

Hi,


I am particularly interested in opening up a Liftetime ISA, aged 24 it seems like a missed opportunity to not take advantage of "free" money from the govt. I have read an awful lot saying that a pension beats a LISA if you get contributions from employer, but what I can't find any material on is doing both?
Background info: currently a basic rate tax payer, but expecting to become a higher rate payer. Currently I am saving into pension, at the highest rate which is matched by my employer. I am able to save the full 4k into the LISA, which I may end up using to buy home, but also have a Help to Buy (maxing that), so could use that for home and keep LISA for retirement.
Am I better off putting the 4k into pension, but not getting any more employer benefit, or using a LISA?
Realise this is not a simple question, but would appreciate any guiding advice, even just where I can find all the relevent info!

Thanks!

Southend1

I did a bit of research on this for my own situation and came to the conclusion that while a basic rate taxpayer the pension is better if the employer allows additional contributions to be made by salary sacrifice. However the LISA is better for additional contributions (above employer matching threshold) if these payments are not via salary sacrifice. You may also want to compare the cost of holding funds in the LISA vs the pension.


See also https://www.telegraph.co.uk/pensions-retirement/financial-planning/lifetime-isa-vs-pension-use-calculator-work-best/

Alexland

My maths were that (after obviously harvesting the maximum employer pension contribution) additional basic rate salary sacrifice pension contribution worked out about the same after withdrawal tax as a LISA contribution. If the employer does not offer salary sacrifice a S&S LISA works better for those additional contributions.

I regret putting additional contributions into my pension when I was basic rate and younger as it used up my lifetime allowance for very little tax benefit. Now I am higher rate I put enough into my pension to get down to basic rate and then put £4k into my S&S LISA. Even though my employer offers salary sacrifice I don't want to waste LTA on stashing basic rate income.

Alex