Anyone with LISA for retirement?

[indiesearcher]

Evening all,

I'm a civil servant with an Alpha pension, but just came across Lifetime ISA as a way to save for retirement. My student loan is about to end (at last), and I could just start paying the same amount into the LISA before I get used to the extra income!

Is there anything beyond the small print I should know before I open one? I've read about penalties for early withdrawal. Seems a good deal!

TIA

I am certainly not an expert, but I thought that LISAs worked better for a home purchase, and that you are better off saving in a more efficient scheme for retirement i.e a pension ( an additional one on your circumstances).

I think LISAs are a no brainer. A guaranteed 25% interest!

I have a LISA with moneybox, I just have it set up to round up from my normal accounts, barely miss the money and it soon adds up.

If you are already getting maximum gain from your employer contributions into your pension (which I assume you are) and you are a 20% tax payer, a LISA offers the same benefit as a private pension on the way in (20% tax relief) and the additional bonus of being tax free when you eventually take money out (unlike pension income that attracts income tax). It also works for self employed 20% tax payers, who don't have an employer to contribute to a pension.

I have a LISA that I am contributing to. Planning to use it to bridge the gap (hoping for early-ish retirement).

Thanks all.

So I'm a 40% tax payer, just, but with that is a nice pension accruing. I could pay additional into it, that's an option with civil service pensions, as is an early buy out premium, where I can buy up to three years worth of early retirement basically without losing from my annual pension amount - so basically there are more options in my pension scheme I could look at first I suppose.

I guess 25% to me seemed a no brainier too, and I was also keen that I could access it at 60 as a lump sum. That would save me taking out a lump sum from my pension too.

Does anyone understand civil service additional pension contributions?!

Some things to know:
There are 4 providers of a Stocks & Shares Lifetime ISA. AJ Bell & Hargreaves Lansdown offer the most fund choices.

For retirement you want S&S LISA as your investing timescale is long.

There is a penalty for early withdrawal, 25%.

You cannot pay in anything once you reach your 50th Birthday.

You cannot move your LISA to another provider easily. AJ Bell accepts a transfer but many others do not. You can only move if aged under 40 (I hope in future Government will fix that, as I don't think it was intended to restrict to age 40 for being able to move to different provider).

DH and I have one each. It really is a no brainier for the 25%. You can only pay into them until age 50 IIRC and then withdraw funds at 60

As a higher rate tax payer you could do AVCs on your Civil Service scheme or have a separate Self Invested Personal Pension.

40% tax relief is better than 25% bonus. Though that needs to be claimed, but can be as easy as a phone call to HMRC - if you can get through!

An AVC is just like a Defined Contribution pension, you build a pot of money. It is tied to the Defined Benefit pension, so may not be accessed as early as a DC pension but check your work scheme rules and chat with the pensions team.

I thought you could continue to pay in to LISA after age 50, but would not receive the extra 25% after that point?

We both have one. We both have our own pensions we max contributions to, bit seemed silly not to make the most of 25%. We don't put loads in, though hopefully will be increasing payments when a few other expenses go down, but we should at our current rate both have £20k to withdraw after 50 which should pay off any remaining mortgage if we haven't paid that off by then.

I honestly would look at paying AVCs into the civil service pension before paying into a LISA. You'll make the contributions out of your pre-tax salary. A big advantage of that is if you are quite close to the HRT threshold you can be making your AVC contributions by salary sacrifice bring your overall pay down to the LRT threshold. Even if this doesn't apply to you you'll still get the additional tax relief. LISA contributions are paid from your post tax salary.

Apart from the main point already mentioned that you don’t pay tax when taking out your money from a LISA, LISA funds do not count towards your Lifetime Allowance and LISA Contributions do not count towards your annual allowance.

The money in a LISA is classed as savings so if you lost your job it could affect your eligability for state benefits. I moved to a SIPP pension instead.