Keep LISA After Home Purchase? Need Fast Advice!

trevorplatt

Hi all,

I need a little advice. I'm soon to buy my first home and I'm using my LISA for this but I have the option of leaving some (a very small amount) in and keeping it for a pension fund, which I can start contributing to. Is this a worthwhile option or should I use it all on my home purchase?

I'm self employed and earn approx. £23k (after taxes/expenses). I already have a very small gov pension from 9 years employment as a band2/3 (this ended in 2010). I do not make any current pension contributions and don't receive any other pension contributions from anywher else. I'm in my early 40s. If any other info is useful let me know and I'll edit this post.

EDIT: Thanks you all for the replys, they are all very useful. I'm kicking myself that it wasn't more obvious but, yes, if I colse it now I can't reopen it later - I'm going to leave in a token amount and when I've got a handle on my new monthly budget I can make a decision then. Plus, it gives me time to do some real reasearch.

Thank you all again. Have a great weekend everyone.

Trev.

masonic

The LISA is a niche product for retirement, and you'd need to look at your needs in retirement and decide whether or not it has an advantage over a traditional pension product. For most people, a pound added to a pension would be more tax efficient than using a LISA because of the PCLS. It would probably be best to evaluate after the forthcoming budget, given the potential for changes.

Emmia

But in any case, if you're in your 40's with what sounds like very limited pension savings, that is something you should be sorting out as a priority.

powerspowers

Tough one, I’m sure there will be some knowledgeable person who can help you with the best pension options for you. 

My view- if you can leave something in it to keep it open without causing issues with your house sale that means you can make the decision later. I believe if you close the LISA now, you can’t open another one. 

Downsides to this are
- you’ll potentially lose bonus if you did decide withdraw it later
- there may (probably) be more tax efficient / productive ways to save in a pension

upsides are
- you can put off thinking about pensions whilst you get you house move progressed
- moving house is a good time to look at budgets etc anyway
- saving something is better than nothing
- you probably already are in the habit of putting money in the LISA

Ive found pension planning to be overwhelming but I knew I needed to do something. So my first step was to start saving something each month in the easiest way for me (for me was workplace AVCs but for you could be LISA). Then I’ve started looking into the best options to maximise my money. But importantly, even if the current plan isn’t the best, it’s better than spending that money on coffee/beer/bicycles whatever you poison of choice. Don’t let perfect be the enemy of the good! 

Good look with the move! 

AmityNeon

masonic said:

For most people, a pound added to a pension would be more tax efficient than using a LISA because of the PCLS.

Why most people because of the PCLS? I can understand employer contributions and higher-rate tax tipping the scales, but LISA withdrawals are 100% tax-free (from age 60).

masonic

AmityNeon said:

masonic said:

For most people, a pound added to a pension would be more tax efficient than using a LISA because of the PCLS.

Why most people because of the PCLS? I can understand employer contributions and higher-rate tax tipping the scales, but LISA withdrawals are 100% tax-free (from age 60).

Yes, you are right, I was absent-mindedly thinking of the situation for S&S ISA vs pension as I'd recently been having that debate elsewhere. For LISA is it more nuanced. Especially for someone self-employed on a relatively low income. One other point that bears mention is that a LISA for retirement should almost certainly be of the S&S variety, not cash as would be used for saving for your first property.

Angelica123

trevorplatt said:

Hi all,

I need a little advice. I'm soon to buy my first home and I'm using my LISA for this but I have the option of leaving some (a very small amount) in and keeping it for a pension fund, which I can start contributing to. Is this a worthwhile option or should I use it all on my home purchase?

I'm self employed and earn approx. £23k (after taxes/expenses). I already have a very small gov pension from 9 years employment as a band2/3 (this ended in 2010). I do not make any current pension contributions and don't receive any other pension contributions from anywher else. I'm in my early 40s. If any other info is useful let me know and I'll edit this post.

Trev.

As you are now over 40, if you closed the LISA, you wouldn't be able to open a new one later down the line. I see no harm in keeping a token amount in the LISA to keep it open while you gather more information. LISA can be a useful retirement asset as a basic tax payer (as a higher tax payer, pension almost always trumps LISA as best retirement product). 

On a wider note though, you definitely need to prioritise retirement planning - you need to start contributing to a pension ASAP. You leave yourself in a vulnerable position 

Albermarle

Angelica123 said:

trevorplatt said:

Hi all,

I need a little advice. I'm soon to buy my first home and I'm using my LISA for this but I have the option of leaving some (a very small amount) in and keeping it for a pension fund, which I can start contributing to. Is this a worthwhile option or should I use it all on my home purchase?

I'm self employed and earn approx. £23k (after taxes/expenses). I already have a very small gov pension from 9 years employment as a band2/3 (this ended in 2010). I do not make any current pension contributions and don't receive any other pension contributions from anywher else. I'm in my early 40s. If any other info is useful let me know and I'll edit this post.

Trev.

As you are now over 40, if you closed the LISA, you wouldn't be able to open a new one later down the line. I see no harm in keeping a token amount in the LISA to keep it open while you gather more information. LISA can be a useful retirement asset as a basic tax payer (as a higher tax payer, pension almost always trumps LISA as best retirement product). 

On a wider note though, you definitely need to prioritise retirement planning - you need to start contributing to a pension or a LISA ( or both ) ASAP. You leave yourself in a vulnerable position 

Added a comment in bold.

Altior

Worth noting, just as it's not been mentioned I don't think, the max age for LISA contribution is currently 50. 

Ciprico

Surely op should take out the whole existing Lisa for house purchase, and any spare cash that leaves left over, bung in a pension to also get the tax relief which he wouldn't get if he left the money in the Lisa....


He might not pay tax when taking his pension, but even if he does he gets the 25% tax free, and benefits from the  compounding of the tax relief element for the next 27 years....

masonic

Ciprico said:

Surely op should take out the whole existing Lisa for house purchase, and any spare cash that leaves left over, bung in a pension to also get the tax relief which he wouldn't get if he left the money in the Lisa....


He might not pay tax when taking his pension, but even if he does he gets the 25% tax free, and benefits from the  compounding of the tax relief element for the next 27 years....

All money withdrawn from a LISA that isn't used towards the first property purchase would be subject to a 25% penalty.

Any spare cash from elsewhere would get a 25% bonus that is compounded if paid into the LISA, and 100% is tax free from the age of 60.

So it isn't as simple as that.