LISA for retirement?

guns511

Hi all, 

Its my first post for a while and I'm typing this on my phone - so apologies for any formatting or spelling mistakes! 

I've recently cashed in my LISA that I had which enabled me to buy my first house. I'm now tempted to open up another LISA to put a little away each month ready for retirement, I'm looking for a bit of advice as to whether I should go with a LISA or not and if it should be a cash or shares LISA. 

A few facts about me, I'm 26 years old and have no partner or children. Live by myself in a mortgaged house (35 year mortgage which will be reduced in 2 years when I renew). I pay into a workplace pension & can't add any more money to the pension. I have no credit card debt and only a television on finance which is 0% over 12 months - I don't plan on paying this off early unless somebody can tell me a reason why I should. I can save a guaranteed amount of £30 a month, but obviously some months if I pick up overtime I can add to this. 

Any suggestions?  

Thank you! 

Chris

eskbanker

A S&S LISA is worth doing if you can spare the money and are confident that you won't need to access it, but do you have adequate readily-accessible savings before committing to a long-term proposition?

Alexland

If you have already contributed to the old LISA this tax year you would need to wait until April before opening a new one.
A cash LISA would be totally unsuitable for saving for 20+ years until age 60 as the interest rate is likely to spend most of the time below inflation eroding your spending power. A sensible S&S investment should grow above inflation.
£30 pm is a very low contribution rate so you wouldn't want to use a S&S provider with any fixed trade charges such as AJ Bell. You would need to check the provider is willing to take such a low contribution.
Is there a reason you cannot contribute more to your workplace pension?

Albermarle

& can't add any more money to the pension.

Seems a bit odd , are you sure ?

eskbanker

Alexland said:

Is there a reason you cannot contribute more to your workplace pension?

Albermarle said:

& can't add any more money to the pension.

Seems a bit odd , are you sure ?

I'd put a fairly substantial wager on OP being the latest in a long line of posters carelessly using that expression as inaccurate shorthand for 'my employer won't increase their contributions to my workplace pension if I increase mine'....

guns511

I was of the understanding that I pay the maximum in already, I pay 13.49% in per month and I believe my employer pays 21.something% in. Without revealing my occupation, its a set scheme that I'm not sure can be deviated from as its a public sector pension. 

I do have a small amount of savings, I did have a years worth of money saved up but the house I brought needed quite a bit doing to it so my savings have suffered. I'm building my savings back up but thought about saving £1 a day so that I would have a nice nest egg when I retire, that way I could use it on an extravagant purchase like a luxury holiday or a new(ish) car. 

Alexland

Oh well I don't know your employer pension but it might be worth double checking with them incase you are able to add more.
Otherwise assuming you are a basic rate taxpayer then yes a S&S LISA might make sense and yes £1 a day invested should be able to buy you a car or very nice holiday at age 60. More good uses of taxpayers money
You might want to go with the EQi LISA as they are cheapest if you stick to funds and will accept as little as £10 contribution.

eskbanker

guns511 said:

I was of the understanding that I pay the maximum in already, I pay 13.49% in per month and I believe my employer pays 21.something% in. Without revealing my occupation, its a set scheme that I'm not sure can be deviated from as its a public sector pension.

Fair enough, it does sound like your pension arrangements are probably adequately covered then.

guns511 said:

I do have a small amount of savings, I did have a years worth of money saved up but the house I brought needed quite a bit doing to it so my savings have suffered. I'm building my savings back up but thought about saving £1 a day so that I would have a nice nest egg when I retire, that way I could use it on an extravagant purchase like a luxury holiday or a new(ish) car.

In your shoes I still think I'd concentrate initially on rebuilding your accessible savings pot and then get after the LISA once you have enough of a surplus to make it worthwhile, although I take your point that even a pound a day will accumulate to a reasonable amount after 24 years of contributions (£8,760) plus growth and bonuses.

Polly05

Alexland said:

A cash LISA would be totally unsuitable for saving for 20+ years until age 60 as the interest rate is likely to spend most of the time below inflation eroding your spending power. 

Why are cash LISAs a thing then, if they aren't suitable? 

grumiofoundation

Polly05 said:

Alexland said:

A cash LISA would be totally unsuitable for saving for 20+ years until age 60 as the interest rate is likely to spend most of the time below inflation eroding your spending power. 

Why are cash LISAs a thing then, if they aren't suitable? 

House buying. 

Alexland

Yes first time buyers who cannot risk the stock market crashing and taking years to recover would use a Cash LISA. For someone investing for 60+ in a S&S LISA the stock market crashing would be great news (however bad it feels at the time) as it means further contributions would be buying more units due to the cheaper prices.