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Are LISAs an either or deal?

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  • Tom99
    Tom99 Posts: 5,371 Forumite
    1,000 Posts Second Anniversary
    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.
    What is your situation then re marginal tax rate, further available employer contributions and whether you can pay into your pension via salary sacrifice?
  • Tom99 wrote: »
    What is your situation then re marginal tax rate, further available employer contributions and whether you can pay into your pension via salary sacrifice?
    My situation is that i'm a basic rate tax payer. Always have been & likely always will be.


    My employer pays the minimum that they can in to the workplace pension. They'd pay a grand total of £0 if they could get away with it.


    Salary sacrifice is not an option. I've asked. They wont be doing it.


    Any other info required then just ask.
  • Tom99
    Tom99 Posts: 5,371 Forumite
    1,000 Posts Second Anniversary
    My situation is that I'm a basic rate tax payer. Always have been & likely always will be.
    My employer pays the minimum that they can in to the workplace pension. They'd pay a grand total of £0 if they could get away with it.
    Salary sacrifice is not an option. I've asked. They wont be doing it.
    Any other info required then just ask.

    How about this comparison, £4,000 net to invest and you are a basic rate taxpayer:

    Money going in:
    Pension - £4000 in = £5,000 in pot.
    LISA - £4000 in = £5,000 in pot.

    Money coming out:
    Pension - if 20% taxpayer on all the pension = £5,000x25% + £5,000x75%x80% = £4,250.
    LISA - £5,000x100% = £5,000.

    So the LISA wins hands down. If some of your pension can be drawn against your £12,500 the net £4,250 will increase but to never more that the £5,000 the LISA will return.
  • Tom99 wrote: »
    How about this comparison, £4,000 net to invest and you are a basic rate taxpayer:

    Money going in:
    Pension - £4000 in = £5,000 in pot.
    LISA - £4000 in = £5,000 in pot.

    Money coming out:
    Pension - if 20% taxpayer on all the pension = £5,000x25% + £5,000x75%x80% = £4,250.
    LISA - £5,000x100% = £5,000.

    So the LISA wins hands down.
    I get that bit totally. That's pretty much what others put to me too which made me think the LISA is perhaps better, for my situation at least (*although like has been touched on, there's other factors)
    If some of your pension can be drawn against your £12,500 the net £4,250 will increase but to never more that the £5,000 the LISA will return.
    This is the bit i'm not 100% on.
    So you're saying then - if i don't earn enough to pay tax, then the pension wont be taxed so will bump up but only ever equal to £5000 in this example.

    This is aside from the state pension coming in to play, which i wouldn't be surprised if it was replaced entirely by the workplace pension by the time i get to retirement age. Even if there is to be a state pension in 30 years time, that plus my workplace plus my SIPP would likely take me in to paying tax, or at least i'd hope so.

    Which brings the other point - if i don't earn enough to pay tax then i am likely going to be in trouble anyway.





    * Now regards these other issues. I'm aware of a few that get brought up.
    - have to wait until you're 60 for the LISA, currently 55 for the pension.
    Well based on my earnings and what i have in the pot right now, i highly doubt either of those figures are going to be a concern to me. I know i want to retire ASAP. Yesterday if possible, but i don't think it'll be before my mid 60s.


    - benefits is an important one though. I'll give you that. That one may or may not come in to play with me. If something was to happen then i may end up having to claim means tested benefits, who knows. Say i end up in a wheelchair and can't work. I'd be forced to dip in to my LISA no doubt.
    But at the same time you can say if if if all day long. You could have all the insurance policies in the world because of "IF" and it could leave you with nothing left over. The individual needs to make the call on what they think will be right though. Which is sort of like playing Mystic Meg but really nobody can predict the future, so you just make a decision and go with it.
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