You may have heard of a brand new ISA which has been made available which promises to help people save more money each year.
The Lifetime ISA (LISA) aims to give people more control over their savings, making it an ideal account for those who are looking to start saving for later life. Although it offers incredible savings choices and even tax free investment growth, is it really going to replace the pension as many people are led to believe?
As financial advisers in Lancaster, we thought we’d give a brief overview on what the LISA means for savers, and what it could mean for the future of pension schemes.
What do LISA’s Achieve?
Just like other ISAs, the LISA boasts a variety of benefits over a standard bank account. With tax free withdrawals and an increased interest rate, an ISA is a must for anyone who wants to invest their money for later life – and more importantly, after retirement.
With the new LISA, investors will also benefit from additional help from the Government; receiving an additional £1 for every £4 that is saved in the account. Additionally, savers under the ages of 60 are granted penalty free access when the money that is saved is used for a deposit on their first home.
It is an incredibly attractive savings option which has even more benefits than that of existing ISAs – so good, in fact, that many people are considering withdrawing from their pension plans and living off the savings accrued in their LISA, but how effective would this really be?
Will It Replace Pensions?
As financial advisers, we have to look at the picture as a whole. While the new LISA is a great option for those who want to save, we wouldn’t recommend opting out of your workplace pension schemes just yet.
Many employers contribute to your pension, whether you know about it or not. Even if you are on the most basic, auto enrolment pension, you’ll eventually get some money back from your employer that goes into the amount you will get for your pension.
Opting out of this will see you gain less in the long run, even though you’ll be getting the extra Government help. Even though the differences may be minor in some cases, it’s still a good idea to continue on with your pension plan and open a LISA as well.
Having both of these systems in place maximises the value of your savings, giving you more to work with once your retirement comes around – or even putting a deposit down on your first home if you’re under 60.
If you’d like to find out more about how you can still benefit from your pension plan while opening a LISA, don’t hesitate to get in touch with us here at Burton and Fisher. We’ll be able to personally advise you on how you can make the most of your money.