Retirement Planning - Pension or Lifetime ISA
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- Опубліковано 30 чер 2024
- In this retirement planning video, I’m going to give you a quick explainer of the rules of Lifetime ISAs, compare them to pensions, and then we’re going to end up with a kind of do this-then-that order of operations.
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Chapters:
00:00 Welcome
00:41 Introduction
01:13 How Lifetime ISAs work
03:22 Comparison with pensions
05:44 Flexibility - The Lifetime ISA nudges ahead
07:48 Why pensions win in almost every other regard
10:15 When should you pay into which?
11:48 Conclusion
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📫 Leave me a comment below - I read all of them and love hearing from you!
Great video, really helped me to make a decision on what pension to invest in for the future.
Thanks Pete, this really cleared a few things up for me
Glad it helped!
Hi Pete,
I have a LISA with Nutmeg. You don't get the bonus at the end of the tax year. I've always received it on a monthly basis.
Was going to highlight this too, quite an important difference as you can get that bonus money working for you sooner than having to wait till end of the tax year!
Same for Moneybox
NOTE: These days, the bonus is paid much more quickly than the end of the tax year - usually within a couple of weeks, so that's a bonus!
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Excellent advice on a range financial senarios
Great video as always, I have a DB pension through work and and LISA with aj bell. I cannot speak for other providers but AJ Bell pay bonuses within 4-8 weeks typically so a lot sooner than end of the tax year. I think they both have a place in many peoples lives especially those younger and earning at basic rate income tax. Thank you again
Yes, most so that now. A *tiny* error on my part, that!
Nice video. Helped out
Hi Pete, I'm enjoying and learning a lot from your content. With salary sacrifice pension something potentially not taken into account is National insurance savings with the employer passing on 100% of their saving. The maths then appears to favour pensions? LTA is also something to then factor in for those who may reach it due to increased contributions.
Hi John. Yes, you’re right. I didn’t include employers paying their NI savings in because that doesn’t always happen - it isn’t mandatory. I’m very sanguine about the LTA though. I did some videos recently on that, especially one with examples which show that it’s often better to pay the LTA charge because there’s often savings in other taxes, especially IHT
Ohhhhhhh an easy 11/10 for the info supplied here 👍
Glad it was helpful! 👍🏻
Great shows and information could you do a show on fixed indexed annuitys
Would you be able to do a video comparing the pros and cons of investing in an ISA (no restrictions on withdrawals), investing in a LISA and investing in a pension (both of which are restrictive as to the age you can withdraw)?
I’m torn between the 25% bonus of a LISA but not being able to access that money until age 60
Great video! Just a doubt you say if you are a higher rate tax payer 100% it would be best to put more money into the pension, to get tax relief but then you said if you can do both LISA and more into pension to get tax relief? But if you have lets say £8k would it be better do half/half or keep adding into the pension up to the £40k threshold? Thanks
There's also the ease of a pension LISA. If I've got 500 in savings to shift then it's much easier to put into the lisa myself rather than deal with my work place finance team to overpay (to not pay tax on it or do extra paperwork).
Although more realistically an extra £100 a month when flush Vs when the boilers gone bust
Is it worth paying more than my employers contribution to my work pension? (I currently do by a few %)
And am I better off just matching it and opening a Lifetime ISA which is invested into a global market for example instead with the extra? Currently i have a S&S ISA which I’m thinking of changing into a LISA or SIPP to have aswell as my workplace pension
Hi I found your videos really do help. I have a final salary pension (one of the lucky ones to still have this) I own my own home already, would you recommend a LISA or something else?
Depends on your tax status. LISAs are still a good bet, but if you're a higher rate taxpayer, you'll get tax relief at 40% - better than the 25% bonus on the LISA. Both are locked up until late 50's (pension) or 60 (LISA)
Im looking to buy my first home, but i dont know how long it will take me to save. I dont know if its worth getting a stocks & shares LISA, or cash LISA to do this. It would be fab to have a video around this topic! Also, with house prices going up, and LISAs being capped at £450,000 (and that price not going up with inflation), is it worth using a LISA to buy a property? ir is there a better way?
Pete, I pay 20% so 25% with employer contributions into my pension and £333 a month into my LISA. The pension is also done before NI contributions. Im saving up for 2 big projects on my house over the next 2 years, which are about £25k each. Do I stop paying into the LISA, for 2 years as I am already saving heavily for retirement, or do I man up and find another way to earn the addition all money. I am already living on 'rice and beans' and drove a 14 year old Toyota aygo.
Fantastic presentation Pete. While I remember Lehman Brothers, I am new to UK tax rules - bingewatching your videos is essential 🙂.
I wonder if Lifetime ISA would be the best option for people with meaningful cash/investments already on their personal account - outside a tax wrapper? Would putting 4K of it (or 8K as a couple, or 12K with a kid) into stocks & shares Lifetime ISA every year and getting 1K on top be a reasonable option if we are quite sure the remainder (16K per person per year) in ordinary ISAs would be enough for any future emergencies?
Furthermore, as we put most of future surplus income (small business owners) into SIPP before taxes, and take out slightly more than living expenses, after-tax money for investing will dry up. Could one then withdraw cash from ISA account, put precisely 4K in lifetime ISA, and still get a 1000 extra every year until 50?
Perhaps a cheeky video: "Your grandma died, you've hit a loterry, you sold your start-up: how to efficiently tax-wrap all that cash?" What to do at 5K, 50K, 500K...
Thank you for all you do!
You could definitely do all that you suggest. Thanks for the kind words - glad they’re helpful!
In my LISA using Moneybox I get my tax relief at the end of the month not at the end of the tax year
My pension from work was around 85 per month. Even with my employer's contribution, there's no way this equates to 8k - I guess this has to do with income and being on a better income in general is just much better.
When you get taxed on withdrawal from a pension, is it just tax or does it get national insurance/student loan taken off too? Thanks for the great videos!
Just income tax. And thank you!
Absolutely superb! Well done! Oh! Btw it woldl be hard to blow that much money in Barry Island! 🤣🤣🤣
Hi - my younger sister is 17, about to turn 18 and then I imagine earning relatively little over the next 5-8 years as she starts university and then gets herself into some form of a career . I', thinking it would be a smart move to set up set up a lifetime ISA for her as she won't likely be adding towards any pensions soon.... The only thing is I'm not sure even a small flat in our area (Herts/London) would be
Tony Robbins makes an interesting point in his book, Money Master the Game. He says that we should all expect income tax to rise between now and when we retire, and who knows what taxes we’ll need to pay on our pensions in the future. What if anything over £20k was taxed at 40% in 20/30 years, who knows! Whereas an ISA would always be tax free.
If you have a £1m pension, it’s not all yours, a chunk belongs to the government, but a LISA is all yours.
If you don’t have enough in your nest egg to retire comfortably, with a LISA you could work part time and top up your earnings with your LISA returns, but with a pension this could push you up in income tax brackets. Or you could withdraw your tax free allowance from a pension and top it up from your LISA.
I reckon having both is the way to go if you can afford it!
I love all of the work you do Pete! Please keep it up!
Cheers Tom. I think that this kind of conservatism makes sense to the extent that encourages us to be smart about what wrappers we use.
So if you aren't buying a house in the near future then max out you pension contribution with your employer then anything about that use on lifetime isa or other investments
Great video! I would be grateful if you could advise what's best for me..37 year old.. started pension contributions age 27, currently 45k pension pot. I earn 38k and i sacrifice 18% monthly from my salary into my employers pension scheme ( the biggest i am allowed) they pay 5% only. Am i doing the right thing? Or shall i decrease my contributions to 5% or 10% and invest the remaining in a SiPP or stocks ans share isa or lisa? So confused here😮
I want to purchase a house of my own and want to setup my pension up aswell. with my work I am 37 years old and did not set up a pension up up during my teens. Can I not just spread the amount into my work pension, aswell as putting the £4000 into LISA yearly?
Shame he didn't cover stocks and shares lisa as this changes the dynamic considerably between a pension v cash lisa
Most providers I have looked at appear to pay the bonus within 4 to 8 weeks rather than at the end of the financial year. Is this a recient change or have I missed something? (looking at stocks and shares lifetime ISAs)
No, you’re right. This is a change from the last time I looked at LISAs
(Around 7:30 in the video) If you took all of your pension out, 400 and something thousand, wouldn't you lose the whole of you tax free allowance (1 per 2 from 100K to 120K)?
Yep, absolutely.
If somebody has no Nett Relevant Earnings, the most they can invest in their pension fund is £3 600 gross. Would the same person still be allowed to invest their annual £4,000 in the Lifetime ISA?
Can we do both pensions and Lisa for buying house
Yep, absolutely you can do both. You can’t use a pension for buying your house, but I don’t think that’s what you meant.
Great video. A couple of extra things: there are big benefits of paying into a pension via salary sacrifice and also gaining the saving on NI (and your employer may give you their saving back too) which amplfies the money going in compared to a LISA. Also, the LISA may be worth diverting a bit to for very high earners who are worried about hitting the lifetime allowance. The LISA could be also be a hedge against the government massively changing pension rules in the future, who knows what they could do :)
Does the property you buy have to be in Uk?
Yep
A nice concise video as always.
Thank you so much! 🙏🏻
So, just to be clear… should one invest in a Lifetime ISA outside of the scope of buying a house? I am in that exact situation where both me and my wife have been maxing out the LISA allowance and we’re in the process of getting our first home. After this happens I am debating wether is worth to keep investing in a LISA or just max out our pensions and use the 20k ISA tax free as another form of more flexible investment (as opposed to putting 4k a year in a LISA).
The reason being you already have a pension for when you retire, and using a LISA is another inflexible fund.
my uninformed thoughts on the question while you wait for a pro to respond...
reasons Pensions can win over LISA: employer matches contributions, you get higher rate tax relief vs 20% with LISA, no inheritance tax when you die. So my guess would be that if you're a basic rate tax payer and you have already paid enough into your pension to maximise your employers contribution then it may be better to put the next £4k into LISA as there is no tax on the way out at 60. whether the inheritance tax thing outweighs this is personal to each of us i guess. this is all based on my understanding of how things work. i could well be mistaken on anything.
I’d say you’re spot on, Lee!
@@MeaningfulMoney cheers! except i spelt whether as weather. now corrected.
Hi Pete. Just a check on what happens if you earn more than 100k. I contribute to a company pension via salary sacrifice and I plan to max out annual contributions. Do I need to tell HMRC up front to ensure my tax code is changed that would unwind the loss of TFA, or does it happen automatically because it is under s salary sacrifice arrangement.?
Hi Iain. If it's under salary sacrifice, then you have literally given up salary, so it'll all happen automatically...
@@MeaningfulMoney great, thanks Pete. Just to say, great videos, really informative and you make them interesting and fun. Keep up the good work!
Very well explained.
Great video all In all but my lifetime ISA bonus gets paid around 4-5 weeks after each deposit rather than the end of the tax year
That's with AJ Bell, other brokers may differ
Ah, that’s good to know, Joe!
Commenting to second this.
Yes, just to say that my LISA provider (Nutmeg) also puts the bonus into my account within a few weeks. But that notwithstanding, this was a great video that speaks to my personal financial planning needs.
Ok but how the question phrased like this "is it worth using 4k of your ISA allowance on a lifetime ISA?
If someone could theoretically max out their ISA limit every year, would it be worth sticking in all in a S&S ISA or having a 4k 16k split?. The extra 1k seems like it would be worth it in this situation no?
If the ISA is intended to be used for post-60 retirement income, then this would appear to be a no-brainer. However, a lot of people use ISAs to cover the period from achieving financial independence until pensions become available. Under those circumstances, a LISA might not be appropriate.
Great answer, Alastair, as ever - thank you!
My wife’s earns under the personal tax allowance. She pays into her work pension to get their contribution with her minimum amount and then looking to max out her LISA. As there is no tax benefit for her on the pension. Is this approach more suitable than paying a greater amount into the pension?
If she paid into a pension from net pay she would get the 20% uplift. But I’m not able to say which is more suitable on your case without straying into giving advice, sorry.
I'm paying money into both, because I'm a baddy!😀
That’s the way, Tom! 👊🏻
LISAs are the best because it’s not taxed when you draw it down 👍
Even with tax, I'd argue that a pension with the compound interest over the years will give you more money a month even after tax than the LISA, the 25% LISA bonus seems great on the surface but then the very very low yearly rate makes it less optimal
@@james2614mc wat
@@haroldbetterson1877 if you don't understand that then you don't know what you're doing
@@james2614mc ok chief
@@james2614mc "very very low yearly rate" - are you assuming a cash LISA? this is not the only option. most are assuming stocks and Shares are purchased within the LISA wrapper. i agree pension still best for most due to other reasons this video discusses.
Great explanation. Very knowledgeable.
Cheers Usman - thanks for the kind words!
Nice comparison. Is there a chance you will make an episode on how to go through self assesment to get additional tax relief on SIPP contributions for higher tax payers? Thanks.
Might be worth looking at this again but considering what happens if you're likely to beach the LTA.
I’ve done a video on this very subject: ua-cam.com/video/7kErytIUmeo/v-deo.html
I have put in 4k today into a beehive Lifetime isa just before the tax year ends, if I put in another 4k from the 6th of April will I have a balance of 10k in 8 weeks ?
Yep - should do, as long as markets don't fall in the meantime.
Good, digestible advice. What's not to give the thumbs-up to?
I appreciate it, Tony!
The other consideration with LISA’s is of course property prices. A 20 year now old in South East may not get a house for £450K in 10 or 20 years time. I’m not sure if Gov. have committed to raising the threshold in line with rising prices (currently >10% p.a. I believe )
Not sure about that, Pete. I seriously doubt it though - all governments have firm on not raising thresholds effectively…
@@MeaningfulMoney this is why I find it so difficult! I know I want to live either in London or the South East. It feels like I’m just going to be slapped with the penalty with the way house prices are rising. Think I’m going to stick to pension and S&S ISA rather than using an S&S LISA. Claer Barrett from the FT wrote an interesting article about the LISA limits. Thanks for the vid Pete - wanted to know the answer to this for a long time.
I'm confused. LISA bonus is 25%. Pension relief is 20%. But at 6mins 22seconds both are assumed at the same rate. Please help if I've misunderstood!
£4000 goes into a LISA, it gets a 25% bonus = £1,000
£4,000 goes into a pension, it gets tax relief of £1,000. This is 20% of the total of £5,000. With pensions we always think in gross terms, i.e. the full amount.
It's a weird way to think about things, but that's the system!
@@MeaningfulMoney Thanks for the clarification!
Why would someone pay into a normal ISA at age 50 and not a SIPP? Surely that would be the logical step, and made for a more accurate comparison?
The bonus on the LISA is also not added at the end of the tax year. With my LISA from HL the bonus is paid after around 6 weeks
I think the question most people ask is SIPP vs LISA, as paying into a workplace pension is a no brainer for most people.
There are many possible options - can't cover them all! Good to know about HL applying the bonus quickly - I've heard that about AJ Bell too...
@@MeaningfulMoney I forgot to mention another great video Pete, but that should go without saying at this point 😁
What's a good bank to take out an Lifetime isa with? Nationwide don't do one
Great video, I had no idea this was even a thing! Obviously the main benefit is when saving up for a house but it could still make a lot of sense as a supplementary retirement income, with the same tax "bonus" but without worrying about paying income tax when drawing it down.
Glad it was helpful, Mark!
Same here, great video
I’m 38 and trying to get all my friends to get signed up before 40 or miss out.
Great video, really summarised it nicely.
I’m higher rate tax payer so going AVC’s for pension.
Little worried that a life time of saving into a pension could be destroyed by a gov decision to reduce lifetime allowance.
I’m using Lifetime ISA to try hedge against this, not sure if best move????
At timestamp 4.34 you say max that someone can put into a pension is £60k, if that's the only relevant income they had in that tax year. It should be £40k right?
That was in the context of using Carry Forward to use previous year’s allowances. £160k is theoretical maximum (4 years times £40k allowance) but in my example the salary is only £60k, so THAT is the maximum they could pay in, gross. Overarching maximum is relevant earnings in the year the payment is made.
How about with a suoerannuation/nhs pension
They're too different to compare, really. DB schemes offer the promise of a future income, indexed for life, whereas a DC pension, or a LISA for that matter are about building up a fund. Very different things...
You really did just read my mind. Only THIS morning I was reading up on LISA vs SIPP. Are you a psychic?
Nope. i just read the comments! (And reply to them...)
Pete - you are a class act! Making a complicated choice clear while comprehensive.
And you are VERY kind, Robert - I'm grateful, thank you! 🙏🏻
Hey Pete I have a question about changing my allocation percentages of my 4 ETF fund I’ve created
The fund is 40% in a ftse100 fund and only 10% in the S&P500 say America has a correction would it be smart to swap those allocations to take advantage of the lower price of the S&P and if I do should I rebalance to take full advantage of it? Thanks
Much as I’d love to answer that for you, Kevin, to do so would be too specific and cross the line into advice, I’d say.
@@MeaningfulMoney damn I hate these adviser rules. But yea I understand and I think my mind is made up on what i plan to do but only time will tell
Hi Pete
I was told that if you have money in a LISA and become unemployed etc, that this counts towards the allowance for universal credit of £6,000 before they reduce any benefits. Would that potentially influence decisions about wether to use LISA v Pension for retirement savings? If ‘emergency fund’ is just in easy access cash for eventualities don’t think I’d want my retirement savings to be covering loss of income really. Dunno… but nobody ever seems to mention this so not sure if I’ve got it wrong.
4:52 i feel like the pension access age will have caught up to 60 by the time the earliest LISA accounts (opened in 2017 by a 39 year old) can be accessed.
Quite likely, Lee
Quite likely, Lee
Can someone explain how there was 8k going into the pension instead of 4K?
What time stamp, Tomas?
@@MeaningfulMoney 8.40
OK. I was using the example of a WORKPLACE pension there, so as well as the £4,000 contribution from the individual, there's the £1,000 tax relief and also an employer contribution of £3,000, making £8,000 in total
@@MeaningfulMoney thanks for the reply.
Thank you for making this video! Been asking you this question for a long time thanks Pete!
I appreciate it, Jack!
You get the bonus between 4-8 weeks after a contribution for the LISA rather than at the end of the tax year, my HL SIPP isn't far off that for the tax relief too. I don't get an employer match and have enough in a SIPP to cover ages 58-60, after which LISA beats the SIPP just by being tax free before taking my workplace pensions/state pension if it still exists at 68. It's a useful tax free stop gap between 60-68 really.
Yeah I’m hearing that, Rk, which is different from what I thought. Good to know you don’t have to wait so long for the bonus!
Other potential loophole is that you withdraw your accumulated LISA funds at age 60 then drip that into a SIPP (income and AA permitting). Effectively getting double tax relief. Not currently banned in the same way that PCLS recycling is.
That's a good shout, Benjamin - relevant income and annual allowance permitting.
Excellent Video - thanks. I have two daughters (18 and 22), just setting up Pensions and LISA's for them now. The process is surprisingly easy and already, looking at projections, I can sit comfortably knowing that they have security for the future. Shame this wasn't around when I was pre 40 (46 now), but I did have the advantage of buying a house in the 90's at about 4 times my salary where my kids will struggle with a similar opportunity. Anyway, thanks again, most useful
We’re very similar, Kyle. I’m 46 (for another week at least) and have two daughters age 22 and 18!
@@MeaningfulMoney Happy birthday for next week!!
Thanks for your video😊. It might have been said already in the comments but you actually get the government bonus on your LISA between 4-8 weeks after depositing money in your LISA account. Might change your calculations a bit
Thanks Taofiq - yes, a few people have let me know that. Don’t think it’ll change the calcs that much though…
Great video as many not aware of LISA's. I do think your contribution comparison should have stopped at age 50 as after then it's a separate pension vs ISA comparison. In that case provided you don't need the money before age 60, you have maxed out any matched employer pension contributions and are a basic rate taxpayer the LISA beats SIPP contributions.
Could you at some point go over investments such as 'buy to let' property, fine wines, classic cars etc? I know they are not easy to pin down but perhaps you could use your experience to give a view?
Noted, Tom…
i’m doing both, i pay 10% pension ( to keep my personal allowance), my company match 10%. then i put 4k in LISA.
should i putting extra in pension instead do you think?
thanks for the video!
If you're paying higher rate tax then pension is better.
I can't make a recommendation here, Mr V, but it sounds like you're doing a lot of things right!
@@lukegraham7251 do you think? save 40% on this end but pay 20% on the back end?
@@heyheyhey3940 the compounding interest on the 40% is well worth it.
@@lukegraham7251 its tricky because you get taxed the other end & have to be careful of pension lifetime allowance
"Blow on a weekend at Barry Island"
I used to live in Cardiff - Barry's always good for a laugh.
I’m assuming a “why not both” statements - just need a spare £44k to max out my limits
Not many folk have that kind of money each year, so the conclusion is more an order of doing things depending on your income levels.
@@MeaningfulMoney I didn’t expect that response (first time commenting on a finance UA-cam channel and not replied back with a bot with a spurless WhatsApp number)
But yes - who has 44k spare ?
Hi Pete, great video! My HL LISA pays my gov bonus about 6 weeks after each deposit, it’s not the end of the tax year as you say, just thought I’d mention this 👍
So I’m hearing Tom, thanks for the confirmation!
Why Barry Island???
Only because I used to live in Cardiff, and it was the first place that came to mind!
Great video but the point about the bonus being paid into lifetime isa only at end of the tax year isn't 100% accurate. Might be true for some Lisa's but hargreaves lansdown Lisa pays the bonus each month or so.
So I’m hearing, Luke - thanks for the clarification
I'm a basic rate taxpayer paying into a defined benefit pension who already owns a home. I'm paying the full LISA allowance before adding to SIPP - I still think that's the right thing to do after watching the vid though I appreciate I'm not in a typical place!
And as others have commented, the bonus is paid within 4 weeks (that said, I really don't like the AJ Bell platform compared to Fidelity - the app on android is pretty poor and the way platform charges work is much more annoying).
Useful video thank you, but the bit about government bonuses only being added at the end of the tax year on LISAs is no longer correct. It's now calculated and applied monthly, meaning there is no discernible difference on the point of Pension tax relief bring invested for longer than LISA bonuses - it's no longer the win for Pensions as portrayed here.
Thanks Matt - you’re quite right of course. Fortunately this was only a quick throwaway line and not presented as a major factor!
....unless you contribute via salary sacrifice into your pension, in which case the tax relief is effectively invested immediately - so would still be a small win for Pensions in that scenario!
Great video as always, but I've searched your videos for pension leveling and not found anything.
Is it worth looking at if you want to retire early- late 50s.
Would be great if you could touch on this in one of your videos 👍
I'd love to see the numbers but with the lifetime allowance charge factored into it.
Good advice in the video.
4:04 It would be a bit silly to put 100% of your earning into a pension as if you took the first £12.5k as wages you be inside your tax free allowance. But when you withdraw money from your pension you might have to pay tax on it. So you'd be losing money.
The 100% of relevant earnings is an allowance. You're right of course, but people who are able to put in this level of money into a pension have other sources of money to make the payment.
@@MeaningfulMoney Yes, I hadn't thought of that.
A potential problem with stocks and shares Lifetime ISAs is after you go past 40 it's impossible to change providers. You should be able to according to the rules BUT all the existing providers systems are unable to facilitate post 40 transferees.
That’s interesting, Chris - I hadn’t heard that. I’ll look into it…
I like the idea of using a Lifetime ISA for semi-retirement at age 60 and then falling back on my workplace pension and state pension later on...
Around the 4:16 mark you said something I do not understand.
“Theoretically you can pay £160,000 of unused allowance from previous years but not if in the current year you only earn £60,000 so you can only pay in this £60,000 and not the full unused allowance.”
What?
Exactly as it says. The ultimate limit is 100% of your relevant earnings in the year in which you make the payment. So if you haven’t used your pension allowances for the previous three years plus this one, you might think you’d have 4x the £40k allowance. But you couldn’t pay in that amount because you’d be limited by the 100% of earnings figure. Make sense?
Have to admit, I did not realise the power of the lifetime ISA and common pitfalls of investing.
This video isn't correct! The within Lifetime ISA bonus is paid within 4-12 weeks of contribution... Dear dear...
Dear dear? You are right - that didn’t used to be the case though.
@@MeaningfulMoney sure - enjoying your videos though! From memory, this changed a year after the Lifetime ISA launch. Maybe redo this one with updated assumptions as they'll make a considerable difference to the projection? Dying to know whether my financial planning will give me what I want in retirement. Thanks for your vids though, people don't talk about finances enough. Thanks for making pensions UA-cam sexy!
I've been looking for this kind of video but must say I'm slightly disappointed. To explain...
I think the house purchase point is a little irrelevant. I totally understand it needs a brief mention but if we're talking PENSIONS or L-ISA then we're clearly looking at retirement, not buying houses.
I myself am approaching 40. I'm a BR tax payer & I would hazard a very good guess that I will remain one throughout my life. The nuisance when you try look in to these things is that everyone harps on about HR tax payers. Perhaps those with an interest in saving for tomorrow are usually HR tax payers. Great - but that doesn't help me.
My employer pays in the minimum to the workplace pension & begrudge this (so they'll never go above it) - therefore I pay in the minimum to get their minimum. This then leaves me a choice - what I want to set aside for retirement above & beyond the workplace pension .... does it go in to the WPP, a SIPP or a L-ISA?
Now I discounted a WPP as I figured they're pretty basic and are probably managed fairly 'safely' so they don't get bad press - therefore the money MAY not grow as well as in a SIPP or L-ISA (investment depending obviously). So now we're at SIPP-vs-L/ISA for me.
Everything I read online suggests in my situation a L-ISA is the better option to age 50, although my problem is I don't understand the WHY.
I think where in the video you go beyond 50 is a little misleading. I'm not sure who would choose to pay in to a standard S&S-ISA over a pension for retirement when they've already done years of a L-ISA as you get no uplift so it then becomes apples-vs-pears instead of almost like-for-like (I said almost).
So I would assume (dangerous) that if a L-ISA is better for my situation - but as I said I don't understand why, then the best thing to do would be to put as much as I can in to the L-ISA (for me £4k is probably a reach tbh but should get somewhere near it. Last year I managed it) until I turn 50 and then from 50 onwards, the money that was going in to the L-ISA, put that in the SIPP instead (for the record I have both a SIPP and L-ISA open).
Like I say, everything I read tells me that in my situation - BR tax payer, already maxed out the WPP but looking to set aside additional, says I should target the L-ISA first until 50. I just don't get why.
Hi Kev. After age 50 in the example, I just assume you pay the same amount into a normal ISA vs into a pension. I think it's clear that you should pay into a pension post-50 for all the reasons you say, but it would be a but daft to just stop the comparison at that age, would it not?!
If you're a BR taxpayer then there's real merit in using the LISA over a pension - you're in a net neutral position, pretty much.
I think you're understanding everything perfectly well, but are looking for a clear 'this is better than that' answer, and I don't reckon that exists. Certainly you won't find it in a generic video like this - you need to answer it for yourself and that might involve some maths, but it's more likely to come down to desired retirement age than anything.
Finally, at nearly 40, there's a lot that can change over the next 20-odd years. Don't try to find a once-for-all answer - that DEFINITELY doesn't exist. instead, make a decision, stick with it, but review it every year or so. Is it STILL the right decisions or should you change tack.
Yes, it'll take some brain energy and being intentional, but that's how the good stuff happens.
Good luck - i wish you well!
@@MeaningfulMoney Thank you very much for taking the time to respond. It wasn't expected but it was very much appreciated.