Planning for retirement - LISA vs S&S ISA

engineer0101

Hi! Looking for advice as to which route to take on saving for retirement and just need a sounding board to make sure I'm not missing something.

31yo and I have £400 per month I'm happy to put somewhere and forget about until retirement. I already pay in 5%+3% employer match (that's their limit!) into a work pension but that's all I want to put in there as I feel there are better systems out there to save. 

I'm looking at putting £333.33 pm into a LISA to receive the maximum £1000 per annum bonus as that's basically £19k free money until I'm 50. The rest I'd invest in stocks & shares.

Am I right in thinking stocks & shares would not yield me the same guaranteed £1k pa as a LISA would? Or is that the age-old question? I have an emergency fund so not worried about funds being tied up should an emergency happen.

Happy to be corrected! Thanks in advance

engineer0101

edit: I realise stocks and shares are not guaranteed to yield any profit but tracking something like the S&P 500 for the next 30 years, looking at the past decades will continue to grow with a positive trend. 

cloud_dog

engineer0101 said:

Hi! Looking for advice as to which route to take on saving for retirement and just need a sounding board to make sure I'm not missing something.

31yo and I have £400 per month I'm happy to put somewhere and forget about until retirement. I already pay in 5%+3% employer match (that's their limit!) into a work pension but that's all I want to put in there as I feel there are better systems out there to save. 

I'm looking at putting £333.33 pm into a LISA to receive the maximum £1000 per annum bonus as that's basically £19k free money until I'm 50. The rest I'd invest in stocks & shares.

Am I right in thinking stocks & shares would not yield me the same guaranteed £1k pa as a LISA would? Or is that the age-old question? I have an emergency fund so not worried about funds being tied up should an emergency happen.

Happy to be corrected! Thanks in advance

Are you a HRT payer?

Are you paid under a Salary Sacrifice arrangement?

MX5huggy

You seem to have missed the basic idea that there are tax wrappers and in these you hold investments (or cash). The 3 main tax wrappers are ISA, LISA and pension. Each has its advantages and drawbacks but within each you can hold stocks and shares. For a 30 year LISA holding you would want to hold stocks and shares in a LISA. So you can have your £1000 cake and eat it by investing it in the S&P (if that is your chosen investment, I would go for global investment, there’s no saying the US will outperform the rest of the world over the next 30 years, look at Japan to 1990). 

Whether a LISA or pension (doesn’t have to be the works pension) is a better wrapper to use depends on the answers to cloud_dog questions. 

Albermarle

For retirement saving, normally pension is best, although LISA has some good points as well.

The pros and cons are explained here ( later in the article )
Lifetime ISA (LISA): how they work & best buys - Money Saving Expert

A S&S ISA is better for when you think you might need the money before the pension/LISA money becomes available, but is still a long term investment.

dunstonh

edit: I realise stocks and shares are not guaranteed to yield any profit but tracking something like the S&P 500 for the next 30 years, looking at the past decades will continue to grow with a positive trend. 

Hopefully, you wouldn't do something as silly as investing 100% into the S&P500 tracker and that was just a simplified example.

Why are you comparing LISA to S&S ISA and not including the pension tax wrapper?  There can be scenarios each of the three wrappers is best for the individual.    So, limiting yourself to just two of them may mean your solution will be less than optimal.

Perksy5

I've been wondering the exact same thing.

I imagine the OP would be considering these 2 as comparisons because pension age is a real issue for us that it's going to increase and increase.
Already private pensions will move from 55 to 58 in the next decade.

A lifetime isa is accessible at 60 though this too could increase but the prospect of the 1k bonus each year is nice as well as the isa wrapper.

S&S isa is also appealing because you could still invest long term, in a tax free wrapper but without any age restrictions so could complement your retirement portfolio instead of all your eggs in 1 basket.

Personally it feels like a pension is a no brainer if you are a higher rate payer but if you're not? Yes there are benefits but what if I don't want to wait for an increasingly higher pension age?
Lifetime vs S&S Isa seems quite a predicament.
I hope more people can weigh in.

NlghtOwl

I like the idea of using all 3 - isa, Lisa and sipp. This gives flexibility of gaining the tax relief/bonus and accessibility to be considered later when reducing tax.  Saying that, if I was higher rate tax payer I would lean more towards pension.