Best LISA for retirement lump sum?(20 Posts)
Anybody seen any LISAs for retirement? DH and I are nearing 40 but will just about be able to get one but haven't seen any marketing for these products!
Not available until 6 April. Interest will probably be pitiful but the bonus is obviously huge so max it out if you can.
Advice from everyone is it is far better to invest in a pension. They are great if used for house purchase but do not perform as well as an accredited pension.
Only one provider has declared so far. I'd max a pension first.
We are trying to diversify our pension risk as DH's pension is final salary related and keeps being adjusted down, im maxing mine but I pay a lot less tax! I see fidelity is introducing one soon...
Pensions are a set of rules, the investments in them are the same as will be in a Lisa. The risk of rule changes is indeed there, however most changes are retrospective. The pension rules are more flexible, more IHT efficient and tax breaks are better.
DB schemes when adjusted down do not change the benefits already earned, only new accrued rights. This means NRD can be varied with varying impact. I would seek advice if you aren't totally sure of the rules and the implications
yes we aren't sure - any idea who would be able to advise on a complicated DB scheme? We don't know where to find that person. We're wary as they have plenty of time to water it down further - DP has so far got 6 years of service, and they've already changed how they calculate the average salary for your pension, capped it and we estimate that if DP accrued 30 years of service by retirement these changes mean he's £10k per year in pension worse off and they've got plenty of time in the next 24 years to water down this provision further. If we could take the employer's contribution as well as DP's (we can't) and put it into a private DC scheme it would yield more.
Speak to a Chartered IFA that specialises in pensions. Look at the list on the PFS website.
Which scheme is it? I'm assuming a statutory scheme, or USS or similar.
One thing to bear in mind is that contributions to a DB scheme are often about 30% of payroll (once top ups and all payments are considered, not just the described input), I doubt you would get that into a DC scheme and that's what's needed to match a 80ths + 3, or a 60ths scheme.
Do bear in mind that the pension accrued hasn't changed, it's the pension going forward that changes.
thanks don't it's USS and there have been at least 2 rule changes that we don't understand in the last few years. We'll go and see someone!
I'm one of the advisers for USS so I'm very aware of the changes. The last round from the 31/3/16 were making it a career average scheme rather than the Final salary. NRD was linked to State Pension age. All the changes STILL mean this is one of the best schemes I work on. I doubt however this is the last of the changes. The 2011 changes were not as severe. All benefits carry the value at which they were earned, no retrospective changes applied.
The 1% matched AVC is very much worth doing as is the AVC generally, they still allow the tax free cash offset - amazing value to higher rate tax payers.
If you want to PM me I'm happy to have a chat, but after the tax year end as I'm rammed
and shouldn't even be on here
ah you sound like exactly who we need advice from! I will PM you and it's not urgent - we've been dithering about getting proper pensions advice for several years already!
No problem. Happy to just have a chat.
Sorry for the total and utter hijack OP
Dh and I have been talking about this just today as my FIL has declared that he is going to set one up for dh. He has concluded we haven't thought about our future.
We've done a lot of reading and we cannot see any advantages. We're late 30s, homeowners, not a bad joint income and, crucially, both pay into a very good company pension, and have done so for years. Dh also has two other small pensions from previous employers. We have some savings and the bit that we wouldn't ever talk to FIL about is that my parents are very wealthy, and as I'm am only child, it's likely that at some point either I or our dc will inherit substantial sums that will probably make for a very comfortable retirement.
Are we right in thinking we don't need a retirement LISA? I can't see the point and we can't understand why FIL doesn't just give dh the money (which wasn't much really) to put into dh's savings account, or even make an overpayment on our mortgage. FIL is likely to be very angry that we aren't thrilled about his grand gesture (he does this occasionally) and I can see a big family fall-out coming our way...
The Lisa pays a 25% bonus per year, admittedly on only 4k. Cash interest rates are 1%. Inflation is about 3%, a lot more for some things.
BTW dont ever rely on an inheritance. If your parents spend a few years in career that will burn through it!
Am very interested in what you said upthread about AVCs. May I pick your brain please. I'm a teacher, higher rate, and was wondering if they're worth it? Difficult to get solid advice. They're run by the Pru and I hear returns aren't great. But the tax break is tempting and my pension won't be as good as it could as I have reduced service. I have been saving into a S and S ISA and am wondering if those returns are better overall. I do know that depends on performance.
Dp and I are both nearly 40 so we're going to open a Lisa each with the minimum payment (£1?) in case we decide to use it in the future (as I understand it you can only open one until you turn 40 but can carry on paying into it once it is open). We both have pensions and no spare cash at the moment but who knows what will happen in the future so we might as well open one.
llhj you can create your own pension instead of the AVC's on offer if you wish, you don't have to use them. It is however the funds you choose, not the AVC that will determine the performance outcome. You have a basic range, good charges and to be honest that is often enough. When people complain about returns it's often due to the lack of risk taken over the long term.
A pension for a higher rate tax payer is strets ahead of an SS ISA. You can save 60p in the £ in an ISA due to the tax you pay (less in fact due to NI). In a pension that £ remains a £. Yes it is taxed when you take it, but unlikely to be at 40%. PLUS 5% growth on £ is 5p. 5% growth on 60p is 3p. This greater fund creates greater growth, creating greater growth. Far more effective.
The debate on performance is another matter. If you are a very high earner and intend to do some substantial funding, paying for advice and then paying for a separate product might be worth it, but in truth, let the tax do its work, pick equity funds (for the main part), pay for a review at 50 and stick with the Pru, would likely be my conclusion.
Also the AVC point above was more the fact the employer matches the first 1%. Free money = no brainer!
You've explained that incredibly well, thank you so much. I really appreciate it and you coming back to the thread. Real food for thought there.
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