S&S LISA worth it?

rigby44

Hi all,

I’ve had a look through the forum and still can’t decide if a stocks and shares LISA is a good option for myself.

This year I could put £16k into my cash ISA and the remaining £4k into a S&S LISA, which the government will add £1k. I could expect maybe 7-8% annual growth with a ‘balanced’ portfolio.

I would hope to be able to add the £4k each year from now (aged 36) until the paying in cut off of 50. That would mean an accessible pot of £75k plus any growth at 60 years of age.

I am a lower rate tax payer and pay into a workplace pension, which I think won’t be worth much at all.

FIREmenow

I believe the maths is that a LISA beats putting it into a personal pension if you are a basic tax payer. 

Is your workplace pension defined benefit or defined contribution? 

Good to be aware that you will be able to access a defined contribution pension at 57 (as it stands) but will have to wait until 60 to access the LISA (as it stands) or withdraw it early with a penalty. Age 60 is fine if you build it into your planning. 

Depending on the conditions of your workplace pension, your employer might match it if you put some extra in up to a certain point, so that is also worth considering. 

Also, you don't have to do one or the other, you could put some extra into your pension and some into your LISA.

We are planning to retire early and have mainly defined benefit workplace pensions that will be actuarially reduced if we take them early, so the LISAs are good for bridging the gap from 60 to our pension normal retirement ages. 

FIREmenow

Just to add, pros and cons are explained here: 
https://www.moneysavingexpert.com/savings/lifetime-isas/#retirement

dunstonh

S&S LISA worth it?

in the right circumstances, yes.

I am a lower rate tax payer and pay into a workplace pension, which I think won’t be worth much at all.

LISA and pensions can share the same investments at the same cost.  So, the only differences are taxation and how much you pay in.     In your case, pension will beat LISA up to matched/maximum employer contribution on the pension but then it will be LISA after that.

rigby44

FIREmenow said:

I believe the maths is that a LISA beats putting it into a personal pension if you are a basic tax payer. 

Is your workplace pension defined benefit or defined contribution? 

Good to be aware that you will be able to access a defined contribution pension at 57 (as it stands) but will have to wait until 60 to access the LISA (as it stands) or withdraw it early with a penalty. Age 60 is fine if you build it into your planning. 

Depending on the conditions of your workplace pension, your employer might match it if you put some extra in up to a certain point, so that is also worth considering. 

Also, you don't have to do one or the other, you could put some extra into your pension and some into your LISA.

We are planning to retire early and have mainly defined benefit workplace pensions that will be actuarially reduced if we take them early, so the LISAs are good for bridging the gap from 60 to our pension normal retirement ages. 

Appreciate that. The workplace pension is defined contribution. I pay in £100 per month and my employer £75.

MallyGirl

is that the max you can get from your employer? If you put in more, would they also put in more? If not then @dunstonh's post indicates that a LISA becomes the better choice after that.

rigby44

MallyGirl said:

is that the max you can get from your employer? If you put in more, would they also put in more? If not then @dunstonh's post indicates that a LISA becomes the better choice after that.

Yer they only pay the minimum. LISA it is.

MEM62

rigby44 said:

I am a lower rate tax payer and pay into a workplace pension, which I think won’t be worth much at all.

rigby44 said:

FIREmenow said:

I believe the maths is that a LISA beats putting it into a personal pension if you are a basic tax payer. 

Is your workplace pension defined benefit or defined contribution? 

Good to be aware that you will be able to access a defined contribution pension at 57 (as it stands) but will have to wait until 60 to access the LISA (as it stands) or withdraw it early with a penalty. Age 60 is fine if you build it into your planning. 

Depending on the conditions of your workplace pension, your employer might match it if you put some extra in up to a certain point, so that is also worth considering. 

Also, you don't have to do one or the other, you could put some extra into your pension and some into your LISA.

We are planning to retire early and have mainly defined benefit workplace pensions that will be actuarially reduced if we take them early, so the LISAs are good for bridging the gap from 60 to our pension normal retirement ages. 

The workplace pension is defined contribution. I pay in £100 per month and my employer £75.

Your second statement explains the first.  If you want it to be worth more you need to pay more in.