NHS Penion vs Investment ISA: please educate me

MaxiRobriguez

prb1984 said:

Dazed_and_C0nfused said:

prb1984 said:

annabanana82 said:

prb1984 said:

Thank you to the mods
I think the clear plan is to maintain NHS pension contributions, and utilise an additional approach to possibly facilitate earlier retirement/part-time work in the second half of my career.
So I've been looking at options and wanted to check I understand the Lifetime ISA right...
- At 36 now, I could open and pay in for the next 14 years.
- Depositing 4k a year would equate to 14*4=56k.
-The bonus of 1k a year would mean a final sum of 70k. 
- This is of course not counting accumulated interest? and not counting any interest from age 50 to age of withdrawal
- I could withdraw at age 60 and not be penalised/taxed i.e., keep the 1k a year bonus
So this 70k would cover the between 60 and when my NHS pension and state pension can be drawn. There are options to look at in addition to this, but just wanted to check this is how it owuld work with the Lifetime ISA?

That's correct, I've just opened up my LISA for retirement, but went for a S&S rather than cash. £70k in 24 years time might not stretch that far.
You might also want to open one this side of the current tax year to get the full benefit 

Thinking about balancing this with paying off mortgage of 200k at around 2.4%, I'm currently paying somewhere around £3.5k in mortgage interest a year, so putting 4k into a LISA to get 1k bonus, would that make financial sense? Or would it be better to use all exess to pay down the capital on the mortgage first to reduce interest paid on the mortgage before doing the LISA?

The point about it not lasting long in 24 years... yes! I need to keep in mind the impact of inflation. As I say, I'm working my way through researching different options, but need to pick one that will best outpace inflation. When you take that into account, LISA doesn't seem the best option. Even if we did one for my partner, she would probably amass about 85k, 155k in 24 years might not last long.

You can choose to invest within a LISA, doesn't have to be cash.

https://www.which.co.uk/money/savings-and-isas/isas/lifetime-isas-ac6mf6s7r9d5

I see. So what is the benefit of putting money into Stocks and sharesLISA as opposed to a stocks and sharesISA?

I understand you can do both up to the 20k limit. But why would you do 4k in S&S LISA & 16k in S&S ISA, vs putting whole 20k in S&S ISA? (obviously assuming you can put the whole limit in)
As far as I can tell are you trading off earlier access for the 1k a year government bonus? 

The S&S LISA is a product for retirement, really. The key thing is access without penalty is age 60 and over.

S&S ISA (no L), is a more general product. No penalties for accessing the cash when you want/need. 

If you're definitely not going to touch the money until 60 then a S+S LISA will be better than a S+S ISA because of the 25% government top up. It's free money.

However, if you definitely won't touch the money until 60 then you /may/ be better off with a SIPP. You said you're getting a payrise to £51k, that puts you in higher rate tax payer territory, albeit just. A SIPP will allow you to dodge 40% income tax for the money you earn above the higher rate threshold. Currently there's not much in it for you, but if you continue to get payrises then you will see greater benefit in having a SIPP.

A SIPP also will allow you access from 57, so three years earlier than a S+S LISA. The main drawback of going for a SIPP is that it will count towards your lifetime pension allowance, where as the S+S LISA will not. You'd need to do some calculations to see if the combination of SIPP + NHS pension together breaches lifetime allowance. If it doesn't, then you'd /probably/ be better off with a SIPP.

As always though, the mathematically correct answer will depend on your personal circumstances which could change.