Higher rate tax payer - pension still best bet?

[Mosaiccat]

We've always made sure to pay into our pensions and are now in a position where we can really start putting more money aside. For years we were living month to month, but DH has worked hard and is now earning more. We are both late 30s.

DH - salary £100k
Me - salary £34k

DH has around an extra £2k a month and I have an extra £1k. My thoughts were for DH to do an extra £800 into his pension, some into Lifetime ISA and the rest into cash ISA.

I'll put my £1k into a cash ISA.

Aims: nice retirement, deposit for DC, nice inheritance left if possible. We only have one DC as for years that is all we could afford and now it's a bit late for more 😢 I really want to support our DC as much as we can as we only have one...

I'm nervous now because of the fact that pensions are now included in inheritance tax. It feels horrible to plan for something 'long term', with money you can't move and for what we were planning to be scuppered!

Any thoughts on our plans - is it the sensible thing to do?

Does your DC have an ISA or a savings account, nobody knows yet what are the exact changes pensions re IHT, but at least by putting money into a children’s account, it’s a start for their future.

What's your own pension like, and why aren't you planning to put more into that?

Why cash rather than S&S for both or lifetime ISA for you?

What's the plan for the lifetime ISA - buying a property or as additional retirement funds?

What age are you both planning to retire?

Does your DH expect to be a higher rate taxpayer in retirement? He'll be getting higher rate tax relief paying in, which is a double bonus if he's only paying basic rate when drawing on it.

What's the current state of your pensions and other savings?

Not questions you need to answer here, but ones you need to know the answers to before deciding whether your plan is the right one.

Lifetime ISA is a no brainer - you get £1k just by depositing £4k/year.

I would do for both of you:
pension - 10%
Lifetime ISA - £4k
Remainder 50% ISA 50% easy access savings

Why the LISA? He'll get higher rate relief if he puts it into a pension but only basic in the LISA. Are you saving to buy a house?

Why no S&S ISA?

I'm on a DB pension. For years I was in lower paid work so have £35k which I'm transferring over to my current pension scheme. If I stay in my current role I should have approx £20k per year, plus state pension.

DH has a significantly higher pot and is paying in about £800 a month at the moment.

Our other goals are:

• house deposit for DC
• nice holiday every few years
• build up a decent level of saving to have a nice retirement
• pay off mortgage

Other savings:

• we currently have £30k

I'm not sure if LISA makes sense for DH as he will get more tax relief from pension. I might put a small amount into a LISA each year as a longer term pot.

Thanks for the replies everyone!

I'm not sure if LISA makes sense for DH as he will get more tax relief from pension.

Is he expecting to be a higher rate taxpayer in retirement? Does his employer match contributions? Is he able to salary sacrifice (i.e. and thereby get an NI benefit)?
That all makes a difference as to whether pension or LISA may be more efficient.

Is your dh's pension just for him or does it include a dependents pension when he dies? If you wont benefit from his pension then more money needs to go into your pension or an ISA in your name. 20k plus state pension will be adequate but wont allow you much spare if, for example, you want to pay for surgery because NHS waiting lists are ridiculous. You'll be paying for other people to do things that you maybe now do for yourself, old age is expensive.

LISA unlikely to make sense for him, maybe for you.

Also @Mosaiccat, just re-reading your post I can see you've said:
I'm on a DB pension. For years I was in lower paid work so have £35k which I'm transferring over to my current pension scheme.

This surprises me as although I am not very familiar with DB schemes, it would be unusual to transfer amounts in this way. I assume you've taken pension advice on doing this and are comfortable with the pros and cons?

That aside, if you're in a DB scheme and are comfortable with putting money away until you're 60 then (on the surface) a LISA would definitely make sense for you, even if not for your husband.