LISA or not to LISA

I'm considering a LISA for retirement savings but debating pros/cons. I have a very good occupational pension and a higher rate tax payer. I have my own home. Is a LISA a good savings vehicle in these circumstances? What might be the pros/cons?
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  • eskbankereskbanker Forumite
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    The MSE LISA article has a section comparing LISA to pension:

    https://www.moneysavingexpert.com/savings/lifetime-isas/#pension-2
  • masonicmasonic Forumite
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    When you say "savings", do you mean a cash LISA? This would be unwise over a long time period due to inflation. A S&S LISA is more appropriate for retirement. Have you reached the annual allowance for pension contributions?
  • hochoc Forumite
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    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
  • pjreadpjread Forumite
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    the 'disadvantage' versus a normal ISA is lack of access / penalty on withdrawal pre- age 60.  The 25% 'bonus' feels a fair to good reward for accepting that disadvantage, unless you expect to need access before then.

    It's probably not discussed much as pensions tend towards 'same or better' benefits, but if you're likely to hit the LTA or are filling the AA it seems worthwhile to me. 
  • masonicmasonic Forumite
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    hoc said:
    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
    The main advantage a LISA has over a pension is that you can draw it down tax free, so it can be useful for a portion of your retirement income after exhausting your personal allowance. But you do need to be aware that the 25% bonus may not be as large as the tax relief obtained through salary sacrifice schemes or if you have income in the higher rate band. I use a S&S LISA alongside my S&S ISA and workplace pension.
  • hochoc Forumite
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    masonic said:
    hoc said:
    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
    The main advantage a LISA has over a pension is that you can draw it down tax free, so it can be useful for a portion of your retirement income after exhausting your personal allowance. But you do need to be aware that the 25% bonus may not be as large as the tax relief obtained through salary sacrifice schemes or if you have income in the higher rate band. I use a S&S LISA alongside my S&S ISA and workplace pension.

    Drawing down tax free applies to any ISA. My question is why do most people use S&S ISA and not first a LISA as a second choice after pension. It's the same thing with a free 1000 each year.
  • edited 19 August 2022 at 6:03AM
    masonicmasonic Forumite
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    edited 19 August 2022 at 6:03AM
    hoc said:
    masonic said:
    hoc said:
    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
    The main advantage a LISA has over a pension is that you can draw it down tax free, so it can be useful for a portion of your retirement income after exhausting your personal allowance. But you do need to be aware that the 25% bonus may not be as large as the tax relief obtained through salary sacrifice schemes or if you have income in the higher rate band. I use a S&S LISA alongside my S&S ISA and workplace pension.
    Drawing down tax free applies to any ISA. My question is why do most people use S&S ISA and not first a LISA as a second choice after pension. It's the same thing with a free 1000 each year.
    Drawing down tax free does apply to any ISA, but a 25% bonus on the way in does not. Drawing down tax free does not apply to pensions, but you get at least a 25% boost on the way in. That is the reason the LISA is superior to other types of ISA, but not necessarily pensions, for retirement. S&S ISAs are still useful if you wish to retire before the age of 60, and for non-pension investments above the LISA limit (where you have LTA concerns or have already salary sacrificed down to the minimum wage).
  • MX5huggyMX5huggy Forumite
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    hoc said:
    masonic said:
    hoc said:
    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
    The main advantage a LISA has over a pension is that you can draw it down tax free, so it can be useful for a portion of your retirement income after exhausting your personal allowance. But you do need to be aware that the 25% bonus may not be as large as the tax relief obtained through salary sacrifice schemes or if you have income in the higher rate band. I use a S&S LISA alongside my S&S ISA and workplace pension.

    Drawing down tax free applies to any ISA. My question is why do most people use S&S ISA and not first a LISA as a second choice after pension. It's the same thing with a free 1000 each year.
    Pension is better than LISA, so the only people who should use LISA are the very few that are hitting AA or LTA and have managed to open one before 40 and are under 50. 

    I use S&S ISA for investing without locking away for 15 years plus, I will transfer it to Pension when I get closer to retirement. 
  • edited 19 August 2022 at 6:29AM
    masonicmasonic Forumite
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    edited 19 August 2022 at 6:29AM
    MX5huggy said:
    hoc said:
    masonic said:
    hoc said:
    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
    The main advantage a LISA has over a pension is that you can draw it down tax free, so it can be useful for a portion of your retirement income after exhausting your personal allowance. But you do need to be aware that the 25% bonus may not be as large as the tax relief obtained through salary sacrifice schemes or if you have income in the higher rate band. I use a S&S LISA alongside my S&S ISA and workplace pension.

    Drawing down tax free applies to any ISA. My question is why do most people use S&S ISA and not first a LISA as a second choice after pension. It's the same thing with a free 1000 each year.
    Pension is better than LISA, so the only people who should use LISA are the very few that are hitting AA or LTA and have managed to open one before 40 and are under 50. 
    Based on the following rates (and assuming any employer matching is being fully utilised)...
    Contributions:
    LISA +25%
    SIPP or pension without salary sacrifice +25% or +67%
    Pension with salary sacrifice +50% or +76%

    Drawdown/annuity:
    Pension up to personal allowance, and PCLS -0%
    SIPP/Pension within basic rate band -20%
    LISA -0%

    For contribution of income in the basic rate band, where salary sacrifice is not possible, and to provide income above the personal allowance, why don't you think a LISA is superior to a pension?
  • AlbermarleAlbermarle Forumite
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    hoc said:
    masonic said:
    hoc said:
    Other than the early withdrawal penalty before age 60 and additional platform fees of a another account are there any disadvantages of a LISA over an ISA?

    The benefits of a pension are clear. After maxing pension contributions the usual next option is an ISA. S&S ISA is fairly commonly used. The only time I ever hear about LISA is for the first time house buyer scenario as a cash saving. I have only heard of LISA compared to other similar schemes like HTB. Why doesn't the S&S LISA for retirement get any attention?

    There are very few S&S LISA providers and I remember when it first came out there was a sense that it would be yet another temporary scheme the government would close down after a few years but it looks like it is here to stay.

    At first I thought contributing to a LISA prevented also contributing to an ISA. But this isn't true, they share the same 20k total limit. So instead of 20k into an S&S ISA, why not put 16k into the ISA and 4k into the LISA and end up with 21k instead of 20k.  What am I missing?
    The main advantage a LISA has over a pension is that you can draw it down tax free, so it can be useful for a portion of your retirement income after exhausting your personal allowance. But you do need to be aware that the 25% bonus may not be as large as the tax relief obtained through salary sacrifice schemes or if you have income in the higher rate band. I use a S&S LISA alongside my S&S ISA and workplace pension.

    Drawing down tax free applies to any ISA. My question is why do most people use S&S ISA and not first a LISA as a second choice after pension. It's the same thing with a free 1000 each year.
    The use of a LISA for retirement purposes is just not very well known/understood by the general public, We have many posters on here who are not aware of it as a possibility( until the forum suggests it). The large majority of the public are woefully under informed about personal finance issues.
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