Uk news Pension or Lifetime ISA? How to choose the right plan to protect your future PremierLeague-News.Com
PremierLeague-News.Com - Top tips to help you choose the right financial plan for your retirement.
PremierLeague-News.Com - Breaking Sport Transfer News ! Ahead of the UK Government’s delivery of the Spring Budget on March 3, Kay Ingram, Director of Public Policy at national financial planning group LEBC, shares her top tips for improving your financial future and highlights a key upcoming date in the pension calendar. Savers under the age of 40 can open a Lifetime Individual Savings Account (LISA) or a pension. Both can be used to save for retirement, with some help from the taxpayer. A Treasury Consultation, published on February 12, proposes to increase the age from which workplace pensions can pay out from 55 to 57, effective from April 2028. This may increase further in line with the rising State Pension age 10 years later. Kay looks at pensions versus Lifetime ISAs and explains which is best for retirement savings. Read More Related Articles State Pension payments will rise in April - these are the new weekly rates Read More Related Articles Get Scottish news that matters to you sent to your inbox with our newsletters Kay has outlined the main differences between pensions and Lifetime ISAs below to help savers choose the option that best fits with their retirement plans. LISAs can pay out from the age of 60. A narrowing gap between the age at which savers can gain penalty-free access makes the choice less clear, especially as LISAs pay out tax-free but pensions are partly taxable. In an ideal world, having both a pension and a LISA would be the best option, but if savings are limited, people may wish to consider a number of points when choosing how best to boost retirement savings with taxpayer handouts. For nil or basic rate taxpayers, the LISA and pension offer the same taxpayer bonus of 20%, so that £8 saved is worth £10 invested. Both offer the same tax-free roll up of funds, with no tax to pay on fund growth or income. When the money is paid out the LISA has the advantage of offering a tax-free income, whereas 75% of the pension paid out is treated as taxable income. Those without earnings can save £4,000 a year into a LISA; however, if they have no earned income, they can save only £2,880 into a pension, so the taxpayer subsidy is up to £720 a year in a pension but up to £1,000 in a LISA. Latest Pensions News Martin Lewis shares pension advice Check your State Pension forecast How to boost Sate Pension payments Post Office Card Account update For employees, joining a workplace pension offers the added advantage of a tax-free employer contribution. Employees earning over £10,000 a year, between the age of 22 and 66, must be offered a pension scheme, with the employer paying 3% of earnings; the employee pays 4% and tax relief adds a further 1%. Many employers offer more generous schemes and not joining or opting out is giving up ‘free money’. Employers cannot pay into a LISA.
News source = PremierLeague-News.Com
. A higher rate taxpayer sees £6 saved grow to £10, and for a top rate taxpayer, £10 saved costs just £5.50. Scots resident taxpayers can gain an extra 1p in the pound as they pay tax at 21%, 41% and 46% respectively. Where more than £4,000 is available for saving long-term, those with earnings or self-employed profits can save in a pension the lower of their earnings/profits in the year or £40,000 into a pension, but only £4,000 into a LISA. LISA savers can pay in and earn the bonus only between the age of 18 and 50. Pension savers can start at birth and continue until 75. Starting a LISA before the age of 40, then funding a pension from the age of 50, could provide a good combination of tax-free income from the LISA and taxable income from the pension. If the pension and other sources of income fall below the personal allowance for income tax (currently £12,500), all the income could be tax-free.
Top Money Stories Today
Child Benefit payment rates are changing
DWP benefit payments from April 2021
Attendance Allowance myths busted
How National Insurance affects pension
The LISA offers access before the age of 60, with a lower penalty than applicable if a pension was accessed prior to age 55 (57 from April 2028). LISAs cannot be continued beyond death and forms part of the taxable estate. Pension funds can be left to others to continue, with tax-free investment, and do not usually form part of the taxable estate. Choice of LISA providers is more limited and most offer only a cash deposit option. For long-term saving a stocks and shares LISA has more potential to maintain its purchasing power alongside inflation, but could go down in value in the short-term. Kay commented: “Ideally savers should consider both options. “There are clear advantages in maximising workplace pension savings first and higher rate taxpayers will get a bigger bonus from pension saving. However, should The Budget on 3rd March end higher rate tax relief, the attraction of the LISA, which pays a tax-free income in retirement, will be greater.”
Source = PremierLeague-News.Com