Where to invest after workplace pension?

allblackeverything

I'm a long time lurker of these boards, and over the last few years they've really helped me change my financial circumstances. I'm now in the position where I have no debts aside from my monthly credit card which gets paid off in full, and am thinking about how I can catch up on my poor (non-existant) pension planning until the past 6 years. I'm already paying in 7.5% of my salary to my workplace pension, as this is the maximum my employer will match. I can now comfortably afford to put away another £500 per month for my retirement after all of my outgoings. My thinking was that I would get the most benefit out of putting the first £4k per year in to a lifetime ISA, so that I got the government's additional £1k and could invest in a range of ETFs. I'm aware I won't be able to take it out early. Does that sound sensible, and once I've added the year's £4k so I get the government bonus, should I keep investing there anyway or put the rest somewhere else?

Really appreciate all of the advice I've got from here so far, please let me know if any more info would help. 

El_Torro

If your workplace pension is via salary sacrifice and / or you are a Higher Rate tax payer then paying more into your pension is probably your most tax efficient option.

LISAs are great too, especially if you’re a basic rate tax payer. 

Other than that then max out your ISA allowance every year. If you still need options after that (nice problem to have!) then the tax efficiency becomes a bit more challenging.

AlanP_2

If it is for retirement then LISA (60+) and / or Pension (57+).

If possibly needed before 57/58 then S&S ISA.

allblackeverything

El_Torro said:

If your workplace pension is via salary sacrifice and / or you are a Higher Rate tax payer then paying more into your pension is probably your most tax efficient option.

Somehow that didn't even occur to me  Yes, so I am a higher rate taxpayer. If I do a ballpark calculation based on the £4000 to LISA idea:

• £6667 before tax, gets me the £4000 after tax, which I then put in to the LISA which leaves me with £5000
• £6667 before tax, which i add to my workplace pension via salary sacrifice, leaves me with... £6667
  

So I should just increase my pension contributions to get me where I'm adding an additional £800-ish (ie the £500 before I pay the higher rate tax) each salary? So this is why people have financial advisors... 

El_Torro

Yes, sounds sensible.

Remember that when you start taking money out of the pension a lot of the money will be taxable. This is not the case when you withdraw from an ISA or LISA. 

But yes, it’s difficult to beat the tax benefit of being a higher rate tax payer who pays into their pension via salary sacrifice.

Albermarle

• £6667 before tax, gets me the £4000 after tax, which I then put in to the LISA which leaves me with £5000
• £6667 before tax, which i add to my workplace pension via salary sacrifice, leaves me with... £6667
• When you withdraw from the LISA there is no tax so you will get £5000
• When you withdraw from the pension , then presuming you will be a basic rate taxpayer you will get 25% tax free and pay 20% on the rest , so you will get £5667 . If you were not a taxpayer when you withdrew it , it would be more 

As your pension pot grows you need to monitor how it is invested ( many people don't)

allblackeverything

El_Torro and Albermarle thank you so much - that is incredibly useful knowledge.

Albermarle

 So this is why people have financial advisors...  

Or read this forum ( its cheaper than an advisor  )