SIPP vs LISA

aDent42

I'm a bit new to all of this, I'm a Civil Servant so haven't given a great deal of thought into pensions over the last 20 years employment as the deal I'm on ought to be enough for retirement. I've got a Final Salary pot and a CARE pot, the former I can Take from 60 the later at SPA. Started to think that I should try and build a reserve to allow me to retire fully or partially at 60 on the Final Salary potion and some savings, deferring the CARE until 68 to avoid any reduction from taking early. As such I'm not looking for a big pension pot, just enough to top up for 8 yrs until both pensions and the state pension are in receipt.

I'm in the position that I've a surplus (about 4k) to invest before year end, I'm holding sufficient cash to cover unexpected events and live comfortably. My expected end of year taxable pay for 19/20 will be about £52k and I get child benefit for two and would rather not have to pay any of it back.

First thought is to put the £4k into a SIPP, avoid the High Income CB charge and get a tax rebate on the £2k higher rate portion. The only downside seems to be taxed on all withdrawals above the first 25% at retirement age?
From what I understand, If I do the opposite and Stick it all in the LISA, I'll still be liable for the High Income CB charge and only get the basic rate top up from the government. The only thing that is appealing is the interest free withdrawal of the full sum at retirement.
However I was wondering if there was another slightly more optimal option to use the SIPP to get under £50K and then put the rest in the LISA?
Does this last option make sense? Have I understood things?

NoMore

With 20 years service - how old are you ? LISA may be unavailable to you as you need to be under 40 to open one

Dazed_and_C0nfused

Pension contributions which attract higher rate tax relief (on £2k in your example) and minimise or remove the High Income Child Benefit Charge are generally seen as extremely tax efficient - from what you have posted you would contribute £1,600 which will be topped up to £2,000 with the basic rate tax relief.

You will reduce your tax liability by £400 (an extra £2,000 taxed at 20% rather than 40%) and save paying 20% of your Child Benefit back.  

You don't mention how old the children are/how much Child Benefit is going to be received in 2019:20 but your £2,000 pension fund could have an effective cost of c£845 (£1,600 actually contributed less £400 personal tax savings and £355 Child Benefit retained not paid back).

When you eventually come to drawdown your DC pot you will get 25% tax free and probably pay 20% tax on the taxable element.

aDent42

NoMore said:

With 20 years service - how old are you ? LISA may be unavailable to you as you need to be under 40 to open one

39 and 9 months, I know I'm time limited. Was thinking I ought to open a LISA even if I don't 'use' it this tax year?

wjr4

Pension over LISA in your situation - just my personal opinion though. 

MallyGirl

aDent42 said:

NoMore said:

With 20 years service - how old are you ? LISA may be unavailable to you as you need to be under 40 to open one

39 and 9 months, I know I'm time limited. Was thinking I ought to open a LISA even if I don't 'use' it this tax year?

I would open a LISA anyway as you can contribute later but not open after 40