Increase Pension Contributions OR Invest More Regulary into S/S ISA

Trundley27

Well I have an emergency fund, I don't believe in holding to much cash, so the additional amount I want to 'Invest' will be long term 25 to 30 years, I just don't know were to put it. It sounds like your pushing me into a LISA?...
Also I can top up my emergency fund if i want to from time to time using mine and my partners disposable income. Or i can inject more cash into my S/S as i want to when i feel like i dont need to hold anymore cash. So im flexible, but as i was initially going to increase my pension contributions this extra money is for the long term, as i wont notice it from my normal disposable income.

So do I just increase pension contributions? Add more into my S/S ISA or Open the Lisa and just pay the difference in my what could be pension contributions in this LISA?


obviously vie started investing youngish and paid into a pension for 10 years so I am off to a good start considering some of my colleagues don't save a penny into anything and there older than me!

Wildsound

If the goal is retirement then:

1) Pension contributions as much as possible if you're higher rate tax payer (if you think you might ever be in a fortunate position to become an additional rate payer in the future, then this is even more important as once you hit this, the maximum you can contribute starts to taper down to eventually £10k max per year)

2) S&S LISA (max £4k per year)

3) S&S ISA

4) Investments with an aim to utilising your CGT allowances as best as possible

The last three, whilst most flexible pre-retirement, may start to create IHT issues as they form part of your estate (pensions don't). The first can create lifetime allowance issues if you go in hard. It's a fine balancing act, but if you give us a full breakdown of your total assets/liabilities etc... then the IFAs will start to chip in more - we like the fine details!

eskbanker

Wildsound wrote: »

If the goal is retirement then:

1) Pension contributions as much as possible if you're higher rate tax payer (if you think you might ever be in a fortunate position to become an additional rate payer in the future, then this is even more important as once you hit this, the maximum you can contribute starts to taper down to eventually £10k max per year)

2) S&S LISA (max £4k per year)

3) S&S ISA

4) Investments with an aim to utilising your CGT allowances as best as possible

The last three, whilst most flexible pre-retirement....

Depends exactly what you mean by flexibility I suppose, but, given the 25% withdrawal penalty, I'd contend that the LISA is significantly less flexible pre-retirement than options 3 and 4, and the fact that penalty-free access isn't available until 60 arguably makes it less flexible even than a pension, certainly in terms of accessibility.

Also, re option 1, OP confirmed in post #3 that they're not a higher rate taxpayer....

Wildsound

eskbanker wrote: »

Depends exactly what you mean by flexibility I suppose, but, given the 25% withdrawal penalty, I'd contend that the LISA is significantly less flexible pre-retirement than options 3 and 4, and the fact that penalty-free access isn't available until 60 arguably makes it less flexible even than a pension, certainly in terms of accessibility.

Also, re option 1, OP confirmed in post #3 that they're not a higher rate taxpayer....

Absolutely the LISA is less flexible than 3 and 4, but more flexible than the pension given that, in an unfavourable situation, you can still access the LISA by taking the small penalty hit.

Alexland

Trundley27 wrote: »

I also opened a S/S ISA this year (Alexland I remember you pointing me in the right direction for this).

Yes and at the time I mentioned you might also want to consider a S&S Lifetime ISA

https://forums.moneysavingexpert.com/discussion/58497142#22

Basically if you are young and basic rate a pension is good for getting employer matching contributions, a LISA is good for a 25% bonus and no tax on withdrawal from 60, additional pension contributions give slight tax benefit and a S&S ISA is good for medium term investment.

Alex

Trundley27

Sorry for the late comeback on this thread.

I have had a think about what I would like to do. My plan for the next couple of years is to increase my monthly amounts into my S/S ISA (Vanguard Life Strategy 80 Acc) and build up a bit more in cash before further investing even more, I then will increase my pension contributions.

I do have an emergency fund but I think I could improve this more. I have decided against a LISA as I would just prefer the option of more flexibility.


I think this plan is fair, bearing in my I have starting investing young and I have paid into a pension for 10 years, I would for now like to hammer out my S/S abit more and increase cash a little further.


Thank you for all your helpful information.