LGPS AVCs vs S&S LISA

MTB1986

Aside from the difference in earliest age they can be accessed (55/57 versus 60) and contribution limits per annum, is there a material benefit to contributing a regular monthly amount into one of these versus the other?  

LISA contributions are made from post tax salary, with 25% uplift, and available at 60 for retirement with zero tax.  LGPS AVCs are made with tax relief from salary and available to take at 55/57 as a tax free lump sum if required.  Does one of these work out better overall for contributions/returns, assuming investments into the same funds?

My LGPS provider doesn't permit salary sacrifice, so contributions would not receive any NI benefit.  I'm a basic rate taxpayer and expect to be in retirement too.

El_Torro

If you're going to be a 20% tax payer in retirement and you are one now then the LISA is more tax efficient than a pension. So might as well go with that, as long as you are you happy with waiting to access the money until you are 60. 

EDIT: To elaborate:

Put £4k into a LISA now, with a £1k top up that's £5k. You can take out the £5k tax free when you hit 60. 

Put £4k into a pension now and the tax relief tops it up to £5k. When you withdraw you will pay 20% tax on 75% of the money, so you only get £4.25k after tax.

MTB1986

El_Torro said:

If you're going to be a 20% tax payer in retirement and you are one now then the LISA is more tax efficient than a pension. So might as well go with that, as long as you are you happy with waiting to access the money until you are 60. 

EDIT: To elaborate:

Put £4k into a LISA now, with a £1k top up that's £5k. You can take out the £5k tax free when you hit 60. 

Put £4k into a pension now and the tax relief tops it up to £5k. When you withdraw you will pay 20% tax on 75% of the money, so you only get £4.25k after tax.

Thanks for that, I’d be looking to use the LGPS facility of taking the whole AVC as a tax free lump sum though, so wouldn’t have to worry about being taxed (as long as the current rules stay in place). 

El_Torro

Ah, ok, I missed that from your opening post. 

In that case I don't see any difference between the two in terms of the money you get. So the pension wins because you can access it sooner. 

daveyjp

Also ask questions of your provider if they have looked into offering AVCs as salary sacrifice and if they have why it was discounted as an option.

MTB1986

daveyjp said:

Also ask questions of your provider if they have looked into offering AVCs as salary sacrifice and if they have why it was discounted as an option.

I’ve asked the question, awaiting an answer, seems like a win-win for members and the scheme so I’d be interested to know why it’s not already in place. 

AlanP_2

MTB1986 said:

daveyjp said:

Also ask questions of your provider if they have looked into offering AVCs as salary sacrifice and if they have why it was discounted as an option.

I’ve asked the question, awaiting an answer, seems like a win-win for members and the scheme so I’d be interested to know why it’s not already in place. 

No benefit to the scheme as it is your employer who pays you, and the Employers NI that they would save, not the scheme so you may be asking the wrong people.