Hey there! Sign in to join this conversationNew here? Join for free
    • Thread Starter
    Offline

    12
    ReputationRep:
    Invest £4,000 a year and govt will give you 25% bonus.

    Can be used towards your first home or as savings for retirement.
    Offline

    19
    ReputationRep:
    No. Too young and skint to worry about a life time scheme. What about you?
    Offline

    19
    ReputationRep:
    (Original post by mattymoo432)
    or as savings for retirement.
    A pension fund is much better for the huge majority of people.
    Offline

    5
    ReputationRep:
    (Original post by Reue)
    A pension fund is much better for the huge majority of people.
    Agree here. Am I right in thinking that contributing to a LISA also has an affect on employee contributions to private pension funds??
    Offline

    19
    ReputationRep:
    (Original post by JJTwentyOne)
    Agree here. Am I right in thinking that contributing to a LISA also has an affect on employee contributions to private pension funds??
    You mean a SIPP? No they are totally separate.
    Offline

    1
    ReputationRep:
    (Original post by mattymoo432)
    Invest £4,000 a year and govt will give you 25% bonus.

    Can be used towards your first home or as savings for retirement.
    but only if the house is less than £450,000!
    • Thread Starter
    Offline

    12
    ReputationRep:
    (Original post by lilybridgwood)
    but only if the house is less than £450,000!
    Yes that is correct. Fortunately I'm buying outside of London so no where near £450k for first home where I need to live
    Offline

    1
    ReputationRep:
    (Original post by mattymoo432)
    Yes that is correct. Fortunately I'm buying outside of London so no where near £450k for first home where I need to live
    Fair enough - potentially a great option for those outside of the M25, but not a realistic savings vehicle for those anywhere near it!
    Offline

    1
    ReputationRep:
    mattymoo432 is fundamentally incorrect. For basic rate taxpayers (i.e. most people) you get the same up-front incentive when saving in a Lifetime ISA as a pension savings product (SIPP etc.) but with the latter your income in retirement is taxed. All income taken from a Lifetime ISA, in retirement, is tax-exempt. In addition, you cannot touch your pension savings until age 55, whereas the Lifetime ISA offers ready access to purchase your first home (from 2018)....and you get to keep the up-front bonus on contributions. The only reasons to favour the pension savings route are if you are a higher rate taxpayer (to get 40% tax relief rather than the Lifetime ISA's 25% bonus), or you are worried about paying inheritance tax (pension pots are exempt).
    • Thread Starter
    Offline

    12
    ReputationRep:
    (Original post by Michael Johnson)
    mattymoo432 is fundamentally incorrect. For basic rate taxpayers (i.e. most people) you get the same up-front incentive when saving in a Lifetime ISA as a pension savings product (SIPP etc.) but with the latter your income in retirement is taxed. All income taken from a Lifetime ISA, in retirement, is tax-exempt. In addition, you cannot touch your pension savings until age 55, whereas the Lifetime ISA offers ready access to purchase your first home (from 2018)....and you get to keep the up-front bonus on contributions. The only reasons to favour the pension savings route are if you are a higher rate taxpayer (to get 40% tax relief rather than the Lifetime ISA's 25% bonus), or you are worried about paying inheritance tax (pension pots are exempt).
    How am I 'fundamentally incorrect'? All I said was it could be used as savings for retirement. For retirement its best for self employed people too!!!!
    Offline

    17
    ReputationRep:
    Not yet, want one, but just want a ltitle more choice than just the only one on offer, I like to have a nearby branch of a bank that I can go into if I want to.
    Offline

    1
    ReputationRep:
    (Original post by mattymoo432)
    How am I 'fundamentally incorrect'? All I said was it could be used as savings for retirement. For retirement its best for self employed people too!!!!
    I am responding to your statement that A pension fund is much better for the huge majority of people. That is simply not true. What can a pension product such as a SIPP offer that a Lifetime ISA cannot? Essentially, nothing. What can a Lifetime ISA offer that a SIPP cannot ? A lot of really valuable things, such as not having to wait until 55 to have any access to funds, and not having to pay any tax on retirement withdrawals.....
    Offline

    19
    ReputationRep:
    (Original post by Michael Johnson)
    I am responding to your statement that A pension fund is much better for the huge majority of people.
    That was me, not the OP.

    (Original post by Michael Johnson)
    What can a pension product such as a SIPP offer that a Lifetime ISA cannot? Essentially, nothing.
    Tax saving, National insurance saving, Employer contribution, Not included in assets (for benefit calculations etc), not included in estate for inheritance tax. Plus most employers have a death in service benefit for pension fund members, essentially a free life insurance cover.

    (Original post by Michael Johnson)
    such as not having to wait until 55 to have any access to funds,
    60 if you want to use LISA for retirement funds,.
    • Thread Starter
    Offline

    12
    ReputationRep:
    (Original post by Michael Johnson)
    I am responding to your statement that A pension fund is much better for the huge majority of people. That is simply not true. What can a pension product such as a SIPP offer that a Lifetime ISA cannot? Essentially, nothing. What can a Lifetime ISA offer that a SIPP cannot ? A lot of really valuable things, such as not having to wait until 55 to have any access to funds, and not having to pay any tax on retirement withdrawals.....
    I think you ought to read through all the comments because I did not say that.

    Ridiculous young.man
    Offline

    1
    ReputationRep:
    (Original post by Reue)
    That was me, not the OP.

    Tax saving, National insurance saving, Employer contribution, Not included in assets (for benefit calculations etc), not included in estate for inheritance tax. Plus most employers have a death in service benefit for pension fund members, essentially a free life insurance cover.

    60 if you want to use LISA for retirement funds,.
    Let's take those point in order:

    1. Tax saving.
    1.1 Incentive on contributions. For basic rate taxpayers, the Lifetime ISA and a personal pension are equivalent. The LISA bonus of 25% is economically equivalent to receiving pensions' 20% tax relief. The 25% bonus negates the 20% income tax paid before contributing to a LISA (as £100 gross less £20 tax = £80 contributed, + 25% of £80 = £20, taking total into a LISA of £100). As I acknowledged earlier, if you are a 40% taxpayer, go the pension route.....relevant for c.8% of all workers under 40, and irrelevant for the other 92% who are basic rate taxpayers.

    1.2 Tax on withdrawals. LISA withdrawals are tax-free. Pension pot drawings / annuities are taxable at the marginal rate. This gives LISAs a huge long-term advantage.

    2. National insurance saving. Contributions to LISA and personal pension pots do not attract any NI benefits, unless you are referring to salary sacrifice schemes, which are a facet of the occupational pensions world. When I contribute to my SIPP, I get no NI relief or rebate.

    3. Employer contributions. Yes, some employers do make contributions to Group Personal Pensions schemes, but again that is related to workplace arrangements and is not a feature of personal pensions per se. Some employers are now looking to add Lifetime ISAs to their GPP arrangements.

    4. Benefit calculations. True, pension assets are excluded, LISAs are not. But is this really a consideration for those choosing between a LISA or a SIPP, say ?

    5. IHT. As per 4. I cannot imagine that those in their 20s and 30s are worried about paying IHT, so pension pots' advantage in this area is a red herring. People are far more interested in LISA's ready access for first time home purchase, without penalty.

    6. Death in service benefit. Again, a feature of workplace arrangements, not of personal pensions per se. My SIPP offers me no such benefit.

    7. Access at 60 for LISA (excluding home purchase). True, but note that today's access to pension pots, at 55, is already set to go to 57 in 2028, and is likely to head to 60 shortly thereafter.

    Conclusion: the pension pot advantages you focus on are unlikely to sway the significant majority of the under-40s choosing between a LISA or a pension pot. Time will tell, but in the meantime higher rate tax relief on pension contributions is likely to disappear.....
    Offline

    19
    ReputationRep:
    (Original post by Michael Johnson)
    1.2 Tax on withdrawals. LISA withdrawals are tax-free. Pension pot drawings / annuities are taxable at the marginal rate. This gives LISAs a huge long-term advantage.
    Pension withdrawals are 25% tax free, so giving the exact same benefits as a LISA for basic rate tax payers.

    (Original post by Michael Johnson)
    2. National insurance saving. Contributions to LISA and personal pension pots do not attract any NI benefits, unless you are referring to salary sacrifice schemes, which are a facet of the occupational pensions world. When I contribute to my SIPP, I get no NI relief or rebate.
    Most people will be in a workplace pension rather than a SIPP. You're not comparing like for like for a majority of people which is as I've always referred.

    (Original post by Michael Johnson)
    3. Employer contributions. Yes, some employers do make contributions to Group Personal Pensions schemes
    All employers are required to make contributions.

    (Original post by Michael Johnson)
    4. Benefit calculations. True, pension assets are excluded, LISAs are not. But is this really a consideration for those choosing between a LISA or a SIPP, say ?
    No, but again: it is a consideration for those choosing between a workplace pension and LISA.



    (Original post by Michael Johnson)
    5. IHT. As per 4. I cannot imagine that those in their 20s and 30s are worried about paying IHT, so pension pots' advantage in this area is a red herring. People are far more interested in LISA's ready access for first time home purchase, without penalty.
    Ok, so just going to disregard a benefit because you don't think many would be interested?


    (Original post by Michael Johnson)
    6. Death in service benefit. Again, a feature of workplace arrangements, not of personal pensions per se. My SIPP offers me no such benefit.
    Lets stick to what I was actually comparing with.

    (Original post by Michael Johnson)
    7. Access at 60 for LISA (excluding home purchase). True, but note that today's access to pension pots, at 55, is already set to go to 57 in 2028, and is likely to head to 60 shortly thereafter.
    Speculation. Compare to how it is today.

    (Original post by Michael Johnson)
    Conclusion: the pension pot advantages you focus on are unlikely to sway the significant majority of the under-40s choosing between a LISA or a pension pot. Time will tell, but in the meantime higher rate tax relief on pension contributions is likely to disappear.....
    You've made no comparisons between a workplace pension and LISA, which is what I was discussing initially. Also note I specifically said to the OP:


    (Original post by mattymoo432)
    or as savings for retirement.
    A pension fund is much better for the huge majority of people.


    So we were discussing retirement savings, not the first time buyer advantages.

    I completely agree that a LISA is excellent for first time buyers when saving specifically for a house deposit however they are not better than a workplace pension when saving for retirement.
 
 
 
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • Will you be richer or poorer than your parents?
    Useful resources
    How much money do you spend a week?The ultimate guide to tax!Guide to student bank accounts

    Sponsored features:

    Web Legend

    Win a Macbook Air!

    Blog about setting up a website for a chance to win in our Web Legend competition.

    Quick link:

    Unanswered money and finance threads

    Groups associated with this forum:

    View associated groups
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

    Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

    Quick reply
    Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.