General thoughts on LISAs

dunstonh

Wish id been taught this is school! 

a) LISAs didn't exist when you were at school 
b) it is taught at school. It's called maths.

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

You are probably better off starting your own thread rather than hijacking another one as that is considered bad form (unfair on the OP as your questions and answers could swamp out theirs).

cloud_dog

TheAble said:

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.

I wouldn't be using a LISA if there was available monies that could be used under HRT, SS 2% and employers SS 13.8%!  Just seems a little 'wrong' TBH.

You select £100 for the workplace pension which costs you £58 (HRT relief and 2% NIC savings).  You get an additional £13.80 going in to the pension from the employers NIC savings.

So for a cost of £58 your pension ends up with a payment of £113.80 going in.  An immediate increase of 96% of your cost.  And there is a way to increase the SS benefits by getting some of the additional monies to benefit from saving on NIC at the 12% rate instead of the usual 2% rate for HRT payers.

I am struggling why you wish to use anything other than your workplace pension TBH (ignoring any early access requirements).

TheAble

cloud_dog said:

TheAble said:

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.

I wouldn't be using a LISA if there was available monies that could be used under HRT, SS 2% and employers SS 13.8%!  Just seems a little 'wrong' TBH.

You select £100 for the workplace pension which costs you £58 (HRT relief and 2% NIC savings).  You get an additional £13.80 going in to the pension from the employers NIC savings.

So for a cost of £58 your pension ends up with a payment of £113.80 going in.  An immediate increase of 96% of your cost.  And there is a way to increase the SS benefits by getting some of the additional monies to benefit from saving on NIC at the 12% rate instead of the usual 2% rate for HRT payers.

I am struggling why you wish to use anything other than your workplace pension TBH (ignoring any early access requirements).

Thanks for the feedback. I guess one reason is I'm concerned about having all my money in a pension, since it will all count as income when withdrawn. Adding in a good amount in ISAs adds flexibility since these can be withdrawn tax free.

Plus the lifetime allowance is another concern - the Tories haven't been particularly helpful to pension savers in that regard and I can't imagine Labour will have much appetite to raise it. Just with growth on my current pot I may be thereabouts by the time I start drawing so I'm questioning a little bit the need to bundle yet more money into it.

CompulsiveSaver

A relative opened a LISA (holding cash) and has since turned 40, as others have said the (cash) LISA appears to be terribly supported by ISA providers (obviously this is their business decision), very few providers are allowing LISA transfers above the age of 40; if any? (happy to be proved wrong on this?) which seems a huge flaw in the whole idea, obviously only time will tell if this improves as more LISA holders reach the age of 40! (my relatives strategy is now leave a few GBP in it, and see if things improve over time, at the moment they are priced out in their current area, so it is unlikely be needed for a while).

Also given the best non-app Cash-LISA account currently pays 1.75% (over 1% below the current best cash ISA rates), meaning you are not only losing due to the meagre £4K allowance Vs £20K in a conventional ISA (obviously the relevancy is dependent if you are in excess of the PSA or will be in future?) but also due to worse interest rates.

It appears that this is not that in favour with the public, I did see an article a few months ago quoting a total LISA holdings of only £1.5Bn (I can't find the article now), when the conventional Cash ISA typically receives over £40Bn a year!

The product appears to be in need to significant improvement, not just in rates, but also by removing many of the obstructions to saving in this savings product! thus making it more attractive to providers.

masonic

CompulsiveSaver said:

A relative opened a LISA (holding cash) and has since turned 40, as others have said the (cash) LISA appears to be terribly supported by ISA providers (obviously this is their business decision), very few providers are allowing LISA transfers above the age of 40; if any? (happy to be proved wrong on this?) which seems a huge flaw in the whole idea, obviously only time will tell if this improves as more LISA holders reach the age of 40! (my relatives strategy is now leave a few GBP in it, and see if things improve over time, at the moment they are priced out in their current area, so it is unlikely be needed for a while).

Also given the best non-app Cash-LISA account currently pays 1.75% (over 1% below the current best cash ISA rates), meaning you are not only losing due to the meagre £4K allowance Vs £20K in a conventional ISA (obviously the relevancy is dependent if you are in excess of the PSA or will be in future?) but also due to worse interest rates.
It appears that this is not that in favour with the public, I did see an article a few months ago quoting a total LISA holdings of only £1.5Bn (I can't find the article now), when the conventional Cash ISA typically receives over £40Bn a year!
The product appears to be in need to significant improvement, not just in rates, but also by removing many of the obstructions to saving in this savings product! thus making it more attractive to providers.

The rate of interest is of lesser relevance to those using the product to save towards their first home over a small number of years. The 25% bonus makes up for a poor interest rate. Those using for retirement at a normal age will tend to opt for S&S LISAs, which are at no disadvantage compared with unwrapped or S&S ISAs, but inferior to pensions for HRT taxpayers and those who haven't exhausted employer matching and salary sacrifice arrangements. It is therefore a niche product beyond its principal use to support high house prices.