LISA bonus

tomatron

Hello,

Firstly sorry if this has been asked before I cannot seem to find a definitive answer so here goes...
I previously held a help to buy ISA and claimed the bonus when I bought my first home 2 years ago. I am now thinking of opening a LISA. Will I still get the LISA bonus as I have previously claimed a bonus for my help to buy ISA? Or because I have already used help to buy the LISA will now never give me a bonus?

grumiofoundation

Yes you will get the bonus, is paid the month after you contribute (~5-7 weeks depending on exactly when contribute). [edit: assuming you are under 40 and therefore eligible to open a LISA].

The fact you own a house precludes you from making a penalty free withdrawal in order to buy a property, but doesn't stop you using it for retirement. In this case it is sensible to have a stocks and shares LISA not cash, due to the long timescale (cash will lose value to inflation).

 

kuratowski

Yes you can get the bonus (assuming you are under age 40 i.e. eligible to open a LISA).  However given you already bought a property, you can now only make a penalty-free withdrawal from the LISA after age 60.  Therefore, you need to view the LISA as a long-term vehicle, not for short term savings.  For these purposes a stocks & shares LISA is preferred to a cash LISA.

May a stocks & shares LISA is right for you, maybe it isn't.  Do you have a work pension?  Are you a higher rate taxpayer?

tomatron

I have a stocks and share ISA currently, but not a LISA stocks and share ISA. Can I have both?

I am paying into a work pension, I fall just under the top tax bracket. 

Thanks both for your help so far! 

grumiofoundation

tomatron said:

I have a stocks and share ISA currently, but not a LISA stocks and share ISA. Can I have both?

I am paying into a work pension, I fall just under the top tax bracket. 

Thanks both for your help so far! 

Yes you can have both - they are different types of ISA. Limited to 20k contributions across all ISA types.

After you have maximised employer pension contributions (free money!!!) you have the choice between saving for retirement by paying into S and S LISA or making additional pension contributions.

For a basic rate tax payer* lifetime ISA ‘beats’ pension in terms of bonus vs tax relief.

*non salary sacrifice - Do you pay pension via salary sacrifice (and would additional contributions be via salary sacrifice?).

Both get 25% bonus/tax relief but lifetime ISA all tax free then whereas 75% of pension is taxable. So if you think you will pay tax in retirement (seems likely if you earning nearly 50k now) Lisa is better on that front.

LISA not available until 60, whereas pension may be earlier. 

LISA is also accessible in an emergency (albeit with a penalty), whereas pension isn’t.  

tomatron

I will look at setting up a Stocks and Shares LISA I think.

Im not sure how to tell if I have maximised employer pension contributions (?) but that may be for another thread. Currently I salary sacrifice 7% (I recently up'd this by 2% as I didnt think I could get a LISA) of my pay check towards my pension, I think my employer adds an additional contribution of 3% (I would need to double check this)

Thanks for your help with this, I am a little in over my head I think!

grumiofoundation

tomatron said:

I will look at setting up a Stocks and Shares LISA I think.

Im not sure how to tell if I have maximised employer pension contributions (?) but that may be for another thread. Currently I salary sacrifice 7% (I recently up'd this by 2% as I didnt think I could get a LISA) of my pay check towards my pension, I think my employer adds an additional contribution of 3% (I would need to double check this)

Thanks for your help with this, I am a little in over my head I think!

Every employer has to pay in min. 3% with employer paying in 5%.

What I mean by maximising employer contributions is paying enough to get all the employer contributions you can (edit - as below - not all employers will offer this)

For example employer might say they will match an additional 2% employee contributions. In this case it is better for employee to pay 2% into pension to get this employer bonus than to pay the 2% into LISA.

(Hope that makes sense). 


Salary sacrifice is a specific method of paying into pension whereby you save on NI. Not all employers offer this. 

https://thepeoplespension.co.uk/salary-sacrifice/

kuratowski

Maximising employer pension contributions means that you take full advantage of any matched contributions, if they are available.  Some employers will pay in extra to your pension on condition that you do as well.  But this is a perk only available from some employers, not all.  It may well not be applicable here.

Salary sacrificing into your pension, for a basic rate taxpayer, is equally as good as Stocks and Shares LISA, and so the choice between them comes down to different ages of access, different treatments for benefits and inheritance, etc.

tomatron

Thanks again for this info.

So double checked and it is a salary sacrifice payment.

The company just pays the standard 3%, no other bonus' as far as I can tell. I am paying 7% with salary sacrifice. If I understand you correctly I may be better off putting that additional 2% I am paying into a LISA? 

kuratowski

I'm fairly sure grumiofoundation is going to be quicker to post this again

With salary sacrifice, the financial uplift is the same as a LISA.

So it's more of a case of considering other factors. With a LISA you can make a withdrawal in case of emergencies (but there is a penalty).  With a pension you have no access until age 55, but the government is going to raise the age to 57, and who knows what future governments will do.

On the basis that the future taxation of pensions is more likely to change than the future taxation of LISAs (i.e. none) I would use up the LISA allowance first before paying more into the pension, if you already have the maximum employer contribution.

Albermarle

Do not want to throw a wet blanket on things, but probably worth saying that 10% going into Pension or Lisa for your retirement is on the low side, if you want a decent retirement income/retire early .
It is not bad, and more than many people contribute, but more would be better if you can afford it . It depends on your age to some extent . 10% for a twenty something is OK . It is also OK for a forty something IF you have already built up a decent pot .
However in other circumstances you should think about increasing it if possible.