General thoughts on LISAs 28 December 2022 at 10:06AM in ISAs & tax-free savings 15 replies 596 views

TheAble

Hi all

I recently turned 40 and opened up a LISA just before doing so. Very little invested in it so far. I've got 4k left of this year's ISA allowance and am trying to make up my mind whether to put it in the LISA for retirement purposes and just wanted to get some opinions on what people think of these accounts.

I've got a decent pension already and thought this might be a useful option to have alongside for tax free withdrawals but I'm concerned about losing the flexibility on the money that a standard ISA would give. Also concerned about getting locked in with a provider charging high fees and struggling to switch, and future governments changing the rules on them down the line.

Appreciate any thoughts or advice.

Albermarle

Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

The section on retirement LISA's explains all the pros and cons of Pension vs LISA.
A standard ISA would give more flexibility, but no bonus added.

TheAble

Albermarle said:

Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

The section on retirement LISA's explains all the pros and cons of Pension vs LISA.
A standard ISA would give more flexibility, but no bonus added.

Thanks for this Albermarle. Just wondering what's your own view? Do you consider these an attractive option or would you stick to a standard ISA?

My pension's already pretty much taken care of through work - salary sacrifice and the company also adds in their NI saving, so making further contributions from cash doesn't really appeal.

Albermarle

If I was reasonably sure that I would not need the money for 20 years, then £4K pa for the next 10 years ( you have to stop contributing at 50 I think) in a S&S LISA, in a high equity investment fund ( like an index tracker) would seem the best bet.
If I thought I might need to access the money before, then a S&S ISA would be better.
Maybe you could contribute to both ?

grumiofoundation

Are you a higher rate tax payer? 

Edit: and echoing  post below - can you add more to pension and via salary sacrifice including NI savings ?

cloud_dog

TheAble said:

Albermarle said:

Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

The section on retirement LISA's explains all the pros and cons of Pension vs LISA.
A standard ISA would give more flexibility, but no bonus added.

Thanks for this Albermarle. Just wondering what's your own view? Do you consider these an attractive option or would you stick to a standard ISA?

My pension's already pretty much taken care of through work - salary sacrifice and the company also adds in their NI saving, so making further contributions from cash doesn't really appeal.

Whilst LISAs can be very useful retirement vehicles, I'm afraid I cannot get past this bit TBH.

If your employer is giving you their 13.8% savings on top of your own 12% / 2% and TR 20% / 40%, any contribution undertaken via your employment would be exceptionally good value.

E.g. BRT payer contributing £100.  Cost to you £68.  Amount actually added in to your pension £113.80.
so for £68 you end up with £113.80 in the pot.  In essence 67% more than it is costing you.

dunstonh

but I'm concerned about losing the flexibility on the money that a standard ISA would give.

The only restriction on a LISA vs S&S ISA is the maturity process.     Apart from that, they have the same funds, same charges and you can move money around investments in the same way.

 Also concerned about getting locked in with a provider charging high fees and struggling to switch, and future governments changing the rules on them down the line.

There are less LISA providers and some of them wont accept transfers in.  So, get it right first time.  

The LISA is not well supported and the retirement angle was only included to give those that don't end up buying a property a way to not lose the bonus.    It isn't a primary function of LISAs.    Historically, when the Government abolishes a tax wrapper, they allow them to be retained by those that already have them but no further ability to top up (caveats apply).   Sometimes over decades, they periodically amalgamate wrappers that are similar.  e.g. S226 RACS inheriting PPP rules.  FSAVCs becoming PPPs.  PEPs becoming ISA etc.

TheAble

Thanks all. Yes I'm a higher rate taxpayer and already max out pension contributions via SS. So I do take full advantage of the work scheme.

Have additionally put 16k in my standard ISA this year but have held back on the remaining 4k as am having this debate with myself whether to put it in the standard ISA as well, or put it in the LISA. This latter is with HL so possibly not the best in terms of charges.

dunstonh

Thanks all. Yes I'm a higher rate taxpayer and already max out pension contributions via SS. So I do take full advantage of the work scheme.

So, you are paying £40,000 a year into your pension?  Well done.

Based on the scenario you have given so far, the best wrapper is pension, followed by LISA, followed by S&S ISA

TheAble

dunstonh said:

Thanks all. Yes I'm a higher rate taxpayer and already max out pension contributions via SS. So I do take full advantage of the work scheme.

So, you are paying £40,000 a year into your pension?  Well done.

Based on the scenario you have given so far, the best wrapper is pension, followed by LISA, followed by S&S ISA

Well not quite haha  I'm in the tricky 60% bracket so sacrifice sufficient to bring me back under it. The carryover may come in handy in future years.

Appreciate all the feedback, thank you all.

sscolls

Hello. I'm 38 and thinking about whether to get a new lifetime ISA with a new deposit or transfer 4k from my help to buy ISA? (which from friends experience seems not great if you go over the 250k threshold or want to use the bonus towards the deposit)

Is there any advice you can recommend on choosing a good LISA and whether to transfer or open new? 

Wish id been taught this is school!