S&S LISA for retirement

shurik2020

Greetings All,
I have been thinking about venturing into S&S ISA territory to start building wife's retirement fund. Her being self employed, there is no pension wrapper to consider as an alternative. However, I thought I might be missing some alternatives so came here for an advice. We are both in our early 30s. We have been quite lucky financially so been able to put together the following: 
1) Rainy day cash pot that should cover up to 12 months gap if we both find ourselves out of work. Plus some real-estate abroad that can provide another few years of no worries life but can take up to a year to liquidate. 
2) 10-15% salary going into a pension pot including overpayment to make use of the tax relief at 40%. I have been paying into various very good work pension schemes (up to 25% contributions) for the past 6 years so accumulated quite a bit already. All funds have medium risk profiles at the moment but at least one will be switched to high risk shortly. 
3) Overpaying 50% on mortgage monthly payments
4) Investing circa £5k a year into collectable assets, mostly whisky. This is intended as another piece of the retirement fund but will very much depend on the market. 
5) Circa £5k annualy that can be invested into the wife's retirement fund 

Is LISA the best option in our situation if Stock & Shares considered? I was thinking about just adding the available funds into my pension contributions but I can't get my head around workplace pensions inheritance rules and whether my wife would actually get any of that if I pass away before retirement. Just want to check I haven't missed the trick somewhere before we commit to LISA in the next few days. 

Thanks in advance for all the feedback. 

masonic

LISAs can be useful after exhausting any higher rate tax relief since they will not be taxed on the way out, so provide some additional low tax income (just net of NI) in retirement above what can be taken from the pension tax free. You mention that there is no pension wrapper to consider for your wife, but anyone can pay into a pension and even those with no income can contribute £2880 per tax year and get basic rate tax relief. A LISA would tend to be more attractive than that option for a low earner and could probably be prioritised. S&S ISAs are useful if you want the option of retiring before getting access to pension/LISA or have excess money to invest after other options are exhausted.

shurik2020

masonic said:

LISAs can be useful after exhausting any higher rate tax relief since they will not be taxed on the way out, so provide some additional low tax income (just net of NI) in retirement above what can be taken from the pension tax free. You mention that there is no pension wrapper to consider for your wife, but anyone can pay into a pension and even those with no income can contribute £2880 per tax year and get basic rate tax relief. A LISA would tend to be more attractive than that option for a low earner and could probably be prioritised. S&S ISAs are useful if you want the option of retiring before getting access to pension/LISA or have excess money to invest after other options are exhausted.

Thanks for the reply. I should have mentioned that her earnings are below the threshold for basic rate income tax hence the focus on the LISA. I would appreciate if you could expand on basic tax relief for low income self employed or point me in the direction of where I can read about it.

We are not planning for really early retirement yet so the LISA money hopefully won't be needed until 60+ years of age. 

masonic

shurik2020 said:

masonic said:

LISAs can be useful after exhausting any higher rate tax relief since they will not be taxed on the way out, so provide some additional low tax income (just net of NI) in retirement above what can be taken from the pension tax free. You mention that there is no pension wrapper to consider for your wife, but anyone can pay into a pension and even those with no income can contribute £2880 per tax year and get basic rate tax relief. A LISA would tend to be more attractive than that option for a low earner and could probably be prioritised. S&S ISAs are useful if you want the option of retiring before getting access to pension/LISA or have excess money to invest after other options are exhausted.

Thanks for the reply. I should have mentioned that her earnings are below the threshold for basic rate income tax hence the focus on the LISA. I would appreciate if you could expand on basic tax relief for low income self employed or point me in the direction of where I can read about it.

We are not planning for really early retirement yet so the LISA money hopefully won't be needed until 60+ years of age. 

https://www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions
See section on 'Tax relief if you’re a non-taxpayer'.

Albermarle

Thanks for the reply. I should have mentioned that her earnings are below the threshold for basic rate income tax hence the focus on the LISA.

You can still get tax relief on pension contributions even if you do not earn enough to pay tax . As said already LISA is probably better for the sums you mention, but she could contribute to a pension as well if more funds were available .

It is better generally if not all pension funds are in one partners name , as a couple you can make better use of her personal tax allowances is some of the pension income is generated from her pension rather than just from all yours.

Of course on the other side you are getting 40% tax relief , so its swings and roundabouts .

shurik2020

Thanks Albermarle & masonic. 

I haven't considered tax implications when both are retired so really appreciate you point it out. We will go down the route of LISA and will try to top it up with a personal pension with a tax relief.