LISA for retirement savings 17 March 2022 at 9:45PM in ISAs & tax-free savings 5 replies 154 views

Poor_Leno

I see that you can't withdraw from LISA until age 60 for retirement savings without paying 25% penalty.

I see also you can't pay into it after age 50.

So, what happens to the product in that decade?  

I just can't quite fathom why you can't withdraw til 60, but can't pay in after 50.  At the very least, you should be able to withdraw at 50 without penalty and put it somewhere that it might grow by more than 1% p/a.

Unless I am missing something?

El_Torro

If you’re going that route then the idea is to invest the money in stocks & shares, not keep it as cash.

Poor_Leno

Yes but a personal pension does the same, with 25% tax break for regular tax payers.

I'm trying to work out why they are selling this product as a retirement savings 'option'.  I don't see how it is worth anything to anyone other than first time house buyers.  Anyone else may as well pay into a pension than have their money degrade in real-terms value for a minimum of 10 years.

El_Torro

A LISA is more tax efficient for retirement than a pension for someone in the 20% tax bracket, since you don’t pay any tax when withdrawing. If you’re in the 40% tax bracket then there’s less of a difference between a LISA and a pension.

I don’t understand your point about money degrading over time. The investment options in a S&S LISA are the same as a SIPP. 

Anyway, better to have the retirement option in a LISA than not. Personally I didn’t open a LISA when I was young enough to do it, there was no big benefit in doing it.

Albermarle

You can have a cash LISA or a Stocks and shares LISA.

As said above if you are using the LISA for building up a retirement pot then you should have a Stocks and Shares LISA.
This should give you a better return than a Cash LISA, over the long term .

If you have Investment fund X in a pension and Investment fund X in a LISA , it will perform in exactly the same way.

The pros and cons between LISA and pension is explained later in this article .. No problem to have both either .

cloud_dog

Poor_Leno said:

I'm trying to work out why they are selling this product as a retirement savings 'option'.  I don't see how it is worth anything to anyone other than first time house buyers.  Anyone else may as well pay into a pension than have their money degrade in real-terms value for a minimum of 10 years.

I'm not sure they are 'selling' it as a retirement option.  The option exists as a way of ensuring people can gain access to their LISA money penalty free at some point where they find themselves unable to use the LISA to purchase their first property.

It just so happens that it is a very useful product to assist a BRT payer in accumulating retirement funds (along with pensions), especially where the individual may know they will want to take a sizeable lump sum all in one go (without incurring income tax).