Should I open a LISA?

sparky0138

It's my 40th birthday next month. I earn just under £10,000 a year and started contributing £45 a month to a LGPS last April after I was auto-enrolled. I've yet to receive a statement for that but I assume my employer will be contributing to it also, however I don't pay tax so don't get any tax relief.

Would it be worth me opening a LISA with £1 before my birthday, just in case my circumstances change in the future, or are they not worth the bother? Would like to know people's opinions please.

Imelda

I think it is worth opening one just in case, although I doubt it would be better than increasing your payments into your current pension (I don't know anything about the LGPS) it might be useful if you come into some money/ have some spare that can be squirrelled away. Do you already own a home?
Regarding tax relief - are you sure you don't get it? I assume you can't salary sacrifice.

Brynsam

LGPS is a net pay arrangement, so a non-taxpayer won't get tax relief on their personal contributions.

OP, open a LISA with £1. Why not keep your options open?

sparky0138

Thanks, guys. I have to say, I was leaning that way, but they seem to have a bad rep and I just wanted some thoughts.

I don't own a home and I doubt I'll ever be in a situation to buy one so I'm not considering opening one for my first home (I assume that's why you asked).

This is the calculator for working out LGPS contributions. It doesn't look like it's a net pay arrangement.

Brynsam

LGPS is a net pay arrangement. Contributions are taken from your salary before tax.

cloud_dog

sparky0138 wrote: »

It's my 40th birthday next month. I earn just under £10,000 a year and started contributing £45 a month to a LGPS last April after I was auto-enrolled. I've yet to receive a statement for that but I assume my employer will be contributing to it also, however I don't pay tax so don't get any tax relief.

Would it be worth me opening a LISA with £1 before my birthday, just in case my circumstances change in the future, or are they not worth the bother? Would like to know people's opinions please.

Hi

My wife is with LGPS, earning below the personal allowance, and we were in a similar position re what to do.

Unfortunately my wife was over the age of 40 so couldn't open one, which left us with the option of separate pension contributions (external to LGPS) or increasing contributions / benefits within LGPS.

Due to the tax position we decided on additional external pension contributions (rightly or wrongly), as she would benefit from the tax benefit (25% added to the contribution) even though she doesn't pay tax.

If she had been younger (under 40) the choice would have been between adding to a LISA or pension. Currently the pensions (personal pension, SIPP, stakeholders) are accessible from 55 and the LISA accessible from 60 (I am ignoring early access to LGSP with reductions and LISA with penalties).

A big consideration is if you might be:

1. Accessing this 'pot' earlier than you NRA
2. How much taxable income you might have during this phase, i.e. before LGPS, SP, and any other pensions)

The reason for this is that pension payments over the 25 tax free amount are taxable, whereas all money in a LISA is tax free.

In our plans (due to other pensions etc) we are likely to draw down the SIPP pension prior to NRA (to aid early retirement), and in doing this the majority (possibly all) the SIPP money will be drawn without paying tax.

The simple answer to your question, and as others have said, is to open one and decide / commit to a course of action when you have considered the options and possible future requirements / planning.