Are LISAs an either or deal?

Admoneyandstuff

I'm looking to buy a house with my LISA in the next couple of years, however the future value of it as a pension is fantastic. Is it possible to take only a percentage of my LISA to buy a house and then keep topping it up until I retire to benefit from it as a pension as well?

SonOf

s it possible to take only a percentage of my LISA to buy a house and then keep topping it up until I retire to benefit from it as a pension as well?

yes. But make sure that future bit is an S&S LISA and not a cash LISA.

kuratowski

And you can only contribute up until your 50th birthday (so probably won't be able to keep topping it up right until retirement).

eskbanker

Admoneyandstuff wrote: »

I'm looking to buy a house with my LISA in the next couple of years, however the future value of it as a pension is fantastic. Is it possible to take only a percentage of my LISA to buy a house and then keep topping it up until I retire to benefit from it as a pension as well?

LISAs and pensions are often compared on threads on here, but it's far from straightforward to declare one as better than the other, as it depends on a variety of individual circumstances.

Check out https://www.moneysavingexpert.com/savings/lifetime-isas/#pension-2 before deciding whether it makes more sense to fund a LISA instead of (or as well as) a pension....

Admoneyandstuff

Thanks, I'll definitely look into it a bit more.

JustAnotherSaver

eskbanker wrote: »

LISAs and pensions are often compared on threads on here, but it's far from straightforward to declare one as better than the other, as it depends on a variety of individual circumstances.

Check out https://www.moneysavingexpert.com/savings/lifetime-isas/#pension-2 before deciding whether it makes more sense to fund a LISA instead of (or as well as) a pension....

I know you say it depends on a variety of circumstances so you're not saying one or the other.


But what i find often on here is a blanket statement of contribute to both.


I would've thought that unless you can max out your LISA in a year (so therefore you can pump more than £4000 in to 'retirement money' in a year) then it would be a one or the other. Only a few here seem to suggest that though. Most people i've seen seem to say do both, which i'm not sure i believe is best (unless you're lucky enough to be able to max out a LISA for example).

eskbanker

JustAnotherSaver wrote: »

I know you say it depends on a variety of circumstances so you're not saying one or the other.


But what i find often on here is a blanket statement of contribute to both.


I would've thought that unless you can max out your LISA in a year (so therefore you can pump more than £4000 in to 'retirement money' in a year) then it would be a one or the other. Only a few here seem to suggest that though. Most people i've seen seem to say do both, which i'm not sure i believe is best (unless you're lucky enough to be able to max out a LISA for example).

I'd agree that blanket statements aren't particularly helpful, including yours!

Seems to me that it's perfectly legitimate for those eligible for a LISA to open one without necessarily maxing it our or committing to using it instead of a pension, not least because there's a hard deadline of age 40 after which that option would no longer be available.

Both LISAs and pensions have specific characteristics and benefits, and neither are set in stone for ever so it's not necessarily a bad thing to hedge bets by using both even if unable (or unwilling) to max either.

Maybe you're right that some assert that both should be used but my preference (as at https://forums.moneysavingexpert.com/discussion/comment/76637726#Comment_76637726 yesterday) would be to flag the number of variables and encourage people to do their own analysis to identify the optimal choice for their own circumstances, rather than generalising....

JustAnotherSaver

eskbanker wrote: »

Seems to me that it's perfectly legitimate for those eligible for a LISA to open one without necessarily maxing it our or committing to using it instead of a pension, not least because there's a hard deadline of age 40 after which that option would no longer be available.

Not even sure why you'd raise that as any sort of point. Considering you can open one with £1 then regardless of whether it'll end up being a good thing for you to use or not it would be pretty stupid to not at the very least open one with £1 as soon as you could so that it would then be an option for you, even if you never use it again. I think surely everyone could agree on that.

Both LISAs and pensions have specific characteristics and benefits, and neither are set in stone for ever so it's not necessarily a bad thing to hedge bets by using both even if unable (or unwilling) to max either.

Maybe you're right that some assert that both should be used but my preference (as at https://forums.moneysavingexpert.com/discussion/comment/76637726#Comment_76637726 yesterday) would be to flag the number of variables and encourage people to do their own analysis to identify the optimal choice for their own circumstances, rather than generalising....

So taking my own situation as an example - at the end of this calendar year i will have paid in £2400 to retirement planning, outside of workplace pension which we will disregard for this topic.


After previous threads i have made, and with my personal situation (BR tax payer, likely always will be) it has been put to me that i will be better off using a LISA in this situation than a pension.


You're saying that it could be better to go x:y LISA:pension (i would say 50:50 but then the ratio could be anything really) purely based on rulings may change. So to take a 50:50 for easy maths, it could be better to go £1200:£1200 split.


And as for...

I'd agree that blanket statements aren't particularly helpful, including yours!

There's a huge difference.


My post is pretty clear that i don't actually know what is best. It's more a wondering, a question than a statement, so you're wrong there.
Whereas others come in and newbies and know nothings such as myself see posts made with such conviction - "this is the best situation, the end!".
So it's a little different

eskbanker

JustAnotherSaver wrote: »

You're saying that it could be better to go x:y LISA:pension (i would say 50:50 but then the ratio could be anything really) purely based on rulings may change. So to take a 50:50 for easy maths, it could be better to go £1200:£1200 split.

It could be, but not purely for that reason, that was just one aspect worth bearing in mind when countering the apparent notion that the usefulness of LISAs is governed by whether they can be maxed out.

As per the other thread linked above, it's fairly straightforward to calculate comparative financial returns from a number of modelling assumptions, but many will wish to consider other factors too, such as penalised access to LISA money up to 60 but no access at all to pension money before 55 (to be increased), plus estate/inheritance projections, asset planning, residency, benefits, investment choice/cost, etc.

The financial calculations are objectively either right or wrong, but the broader issues are more subjective (and therefore unsuited to generalisation) - I don't know to what extent these have already been discussed on your threads but would suggest they'd probably be a better place to continue if you've already started going through things in detail elsewhere....

Tom99

JustAnotherSaver wrote: »

I would've thought that unless you can max out your LISA in a year (so therefore you can pump more than £4000 in to 'retirement money' in a year) then it would be a one or the other. Only a few here seem to suggest that though. Most people I've seen seem to say do both, which I'm not sure i believe is best (unless you're lucky enough to be able to max out a LISA for example).

I would agree with you when comparing money paid out v money paid in (rather than the non financial differences), but it will depend on your individual circumstances and may change as you top up more, for example it might be:

- As a higher rate taxpayer who expects to be a basic rate taxpayer in retirement pay into a pension until you have exhausted the 40% tax relief on the pension contributions.
- Then pay into a LISA.
- Then go back to pension contributions with only 20% tax relief once you have put £4,000 into the LISA.

Whether you get an employer contribution or the benefits of salary sacrifice on the pension will alter the ranking between pension and LISA.

JustAnotherSaver

Tom99 wrote: »

- As a higher rate taxpayer
Whether you get an employer contribution or the benefits of salary sacrifice .

This is probably why i feel this forum is a bit of a needle in haystack thing for me, or rather people in my situation.


I get the impression that the vast majority of people here are higher rate tax payers (since it appears to be the knee-jerk response, as though it is just assumed that every member here is one), i get the impression that people here work for fantastic employers who pay considerable amounts above and beyond the minimum in to their pension (this appeared to be confirmed by a thread someone made on the topic where people like me appeared to be in the clear minority on this forum, yet from people i know someone like me is in the majority), and then it also appears that everyone here has the option of salary sacrifice.


So when i'm delving through, looking for something that may apply to me, it's a bit of a banging the head off a wall session - which is why i then have to make numerous threads on various topics, which end up piddling some sensitive people off but hey ho i need answers.



Not 'having a go' or anything like that. Just simply saying it appears hard to find detail that applies to myself on here due to what seems like auto-assumptions.