I’m struggling to decide whether I should bother saving into a LISA for retirement
30 January 2023
Question by Colin
Hi there I’m struggling to decide wether I should bother saving into a LISA for retirement. I am 35 and have a defined benefit pension scheme. I also make small regular contributions to a linked AVC fund as it benefits from 40% tax relief at source. I’ve also started a stocks and shares ISA with a modest amount saved so far. My issue with the LISA is locking the savings away until 60. It’s tempting because of the government bonus. I was considering focusing mainly on ISAs going forward as the avc pension fund alongside the DB pension looks a bit complicated and I also have to mindful of the LTA charge at retirement. Any thoughts would be much appreciated. I plan on paying 15% per month. 5% is already going into my DB pension for company match. Many thanks Mr Wright
Answered by Lisa Caplan
You are very lucky to have a Defined Benefit pension!
Yes, the LISA benefits from a 25% bonus, but this comes at the cost of flexibility. It depends on what is more important to you.
If you are worried about the Lifetime allowance, ISAs can be useful but of course you will not get the tax relief, but you do get the 25% bonus with Lifetime ISAs.
The Lifetime ISA is very flexible once you are over 60 (or buy your first home but from your questions this may not be relevant to you), as you can withdraw as much as you like without losing the bonus and pay no tax. Like a pension, there will be no tax to pay while the funds hopefully grow.
I hope this helps
Director Foundation Planning
I am a chartered Financial Planner, with over 14 years of experience helping people to understand their financial position and to make good financial decisions. I offer easily accessible and digestible guidance and advice on key areas, so that you can move forward with confidence.