LISAs

[Margo2023]

I originally thought these were only for 1st time buyers but learned that anyone up until age 39 can open one and aware can't be touched until 60. I'll be 39 next year so common sense tells me to go ahead and open one and shift some of my ISA pot into a LISA. However, Im unsure if I should be sticking some more money into my employer pension pot instead, for the tax advantages (HR tax). Quick check of pension which sits at projected pot 700k which seems more than I would need by the time I am in my 70s! I feel like I am missing something here. 1. Is the likelihood that predicted pensions will fall drastically therefore current predicted pot will be no where near pension providers estimate? 2. If you were me, would you stick some money into a LISA or contribute additional amount to workplace pension (additional amount would not qualify for the employer matched contribution). Mortgage of 150k in case that is relevant, trying to prioritise as single and quite enjoy it this way

I do both! Pay the max into my LISA (it’s £4K a year max). I love it as the payments from the government are like magic. I have a Skipton one and enjoy logging in and see how much more I’ve been given 😁 I also pay 2% extra into my pension (up to 11% salary). If I had to choose, bearing in mind you have a good pension pot, I’d go for the Lisa as you might want some money age 60 rather than pension age

I max out my LISA every year as I like the freedom of drawing down at 60, and being able to take as much as I want tax free, so even if I'm still working part time it won't mess up my income tax.

Do they ask for evidence you're purchasing a home if you withdraw?

If you’re using it for a house, yes, it goes to the solicitor I think

Yes the conveyancer will need to withdraw the funds for you. If you withdraw it, you'll lose your government bonus,

Is the likelihood that predicted pensions will fall drastically therefore current predicted pot will be no where near pension providers estimate?

Can you explain this - why would they fall drastically?

@NoBinturongsHereMate there was around 400 billion wiped off the UK pension funds just a couple of years ago. Pensions are investments so just like any other investment, the expected future value of the pot of money isn't guaranteed. In the early 90s there were many people who lost a fair shed of their pot due to miss selling.

things to be aware of:

• if using a LISA for retirement you really need a stocks and shares Lisa and there aren’t as many providers. Don’t let your retirement money sit in cash for 20 years.
• unlike a pension, money in a LISA counts as savings for any welfare applications so you might be forced to use it and pay a penalty.
• as a higher rate tax payer you’d potentially be getting 40% relief on extra payments in a pension but given your pension pot is likely to be large you may want to think about how you’d minimise tax taking money out (which is the advantage of having some in a Lisa).
• if the budget reduces tax incentives of pensions for higher rate tax payers, a LISA becomes more attractive. You can open one with very little so it feels prudent to at least open one while you can with the minimum so you’re hedging your bets.

If you cashed in after the big drop 2 years ago you would have lost out, if you stuck with it your funds would have recovered by now and then some (that’s your average fully diversified funds).