Are my LISA/pension sums right?

[fivetriangulartrees]

I'm mid-40s, in the 40% income tax bracket and currently put £100 per month into a LISA. I also have a pension. I'm considering whether I should continue putting money into the LISA.

Option 1) Continue putting £100 per month into a LISA for the next 5 years and receive basic rate tax relief (=£120 per month). Assume 5% growth annually. That's... £9012.

Option 2) Put the £100 per month into my pension for the next 5 years and receive higher rate tax relief (=£140 per month). Assume 5% growth annually. That's... £10,514. I'll be able to take 25% tax-free and 75% will be taxed at the basic rate. That makes a total of £8936.

Am also considering option 3.

Option 3) Have an extra £100 per month to spend for the next 5 years. Occasional holidays, new socks, virtually unlimited Maltesers etc.

Are my sums for options 1 and 2 correct? Am I missing something? I really wasn't expecting the LISA to come out better.

Is the pension through your employer, and if so do payments come out before or after NI? Before would add significant weight to the pension side of the balance.

And when do you think you want to start drawing it? If it's before state pension age then - depending on your other sources of income - you may not pay tax on some or all of the 75%. If it's after 60 but before state pension age, and you take 16k a year from the pension and the balance of your required income from the LISA, you'll pay no tax. If it's before 60, the LISA won't be available.

I have a LISA, I was under the impression that whilst you cannot pay into it after 50, you cannot withdraw from it until 60. Therefore still gaining the compound interest.

You didn’t say how much you currently have in the pot, but if you estimate around £9000 on 5 years. To add on 10 years worth of compound interest on top of that would take you to around £15,000 by the time you can withdraw from it at 60.

Ah yes, NI, I missed that. It's done by salary sacrifice, so the payments come out before NI. Thanks! The timing is also a consideration, that's true.

Also your sums on tax relief aren't quite right. If you are paying in via salary sacrifice and want to pay in the equivalent of £100 net (and are a 40% taxpayer) the gross earnings before tax is £166.66. Because if you tax £166.66 at 40% the net is 100. So if you put £100 net in the LISA it gets basic rate tax relief so you get £125 - because £125 x 80% is 100. So the gap between them is bigger.

Don't forget also that on taking pension as income you'll also have your personal allowance for some or it.

Also salary sacrifice for pension will include NI saving too

Thanks @PosiePerkinPootleFlump, yes, that's quite a fundamental error!