Important Retirement Planning Tips
The new Lifetime ISA (LISA) is due to launch in April 2017. It is aimed to help two major financial causes in the UK. One of these is to help young people save for their retirement with some help from the government. So, is the LISA an alternative to a pension?
This does not constitute advice and advice should be sought in all instances before acting on it.
Using the Lifetime ISA to plan for retirement?
The Lifetime ISA (LISA) is a new savings account to save for retirement, with the added benefit of government support. UK residents over 18 and under 40 years of age can open an account, and can contribute until they are 50 years of age.
It is an incentive to encourage young people to consider their financial future earlier.
The funds saved accumulate over the years and can be drawn out after the age of 60. The funds can be used for whatever purpose you choose, perhaps paying off an existing mortgage on your home, reinvesting for a monthly return, or to utilise gradually through your retirement.
If you want to draw the money from your LISA fund before you are 60, it needs to be for the purchase of your first home, else penalties will apply.
Can a LISA replace saving into a pension fund?
Experts and financial advisers are warning to carefully consider your options if you are planning to to completely replace a pension with a LISA.
This is particularly relevant if you have the option to join a workplace pension scheme as the value of employer pension contributions are likely to exceed that of the LISA bonus in the long-term.
The LISA is also a new product and whilst it could be a good option for young doctors and dentists as a means to save for retirement, totally ignoring the benefits of a pension could be dangerous.
There are exceptions to this, so it is always best to speak with a professional financial adviser that can give guidance on your own situation.
Things to consider:
- If you are self-employed, so don’t have the benefits of an employer-based pension scheme, then a LISA could be a good consideration for your retirement plan
- If you have a workplace pension, but want to save more, and have already maximised the employer contribution, the LISA could give you this saving facility
- If you have reached your Lifetime Allowance for pension contributions, then the LISA is an alternative option to allow savings, with financial benefits.
Other considerations
The rules regarding withdrawal from a LISA for retirement purposes is linked to the state pension age. At present, penalty-free withdrawals from a LISA is set at 60.
For a personal pension, it is possible to access your money at age 55, although some tax implications may arise.
These things can be discussed with your financial adviser when looking at an integrated retirement plan for you and your family.
Before you go…
Don’t forget to download our FREE Financial Guide with information all about the Lifetime ISA.
Need help with your retirement plans? Speak to Darren
Retirement planning for doctors and dentists is essential, as with the level of income you earn, you have options. Please contact Darren for a free, no obligation appraisal.
Tel: 01403 780 770