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of your money. I'm Maren sumstweb Editor at Large for Bloomberg Ukay Wealth and with me today, senior borter and author with the Money to Show the newsletter, John Steberg, John him mel Okay. Now you know how we always ask people to send in their questions in their comments.
Yes, we doo. Who thought they actually do? They actually do.
Thank you listeners, aver listening, and be for sending this stuff in. And we've got a good one today. And not only is it good one, but it's an easy one and we like that in the question, right.
Yes, we love an easy question.
There's a lot going on at the moment. Almost all questions are difficult. This one is not. And we particularly like this one because you put flattery at the front. And by the way, listeners, if you want us to answer your question, flattery at the front is a really good idea. So he starts off by saying, I love the podcast. The banter between you and John is brilliant. Oh god, we're gonna have to keep up the banter now. And we're a podcast to you and made it in heaven.
We're going to put that on our marketing thinks. This is this is how you get your question answered. So could you please discuss in a future episode what young saviors should prioritize between contributing to a SIP or an itceup with an aim towards retirement. I'm twenty nine. I aim save around twelve to fifteen per cent of my income for retirement. Well done. I've prioritized retirement saving since
my first job. Currently, my penching contributions are eight percent via auto enrollment, and the rest of my savings go into a SIP. Although I normally try to save money separately into an ISA, I generally don't reach the twenty thousand pounds limit, and this year not much has gone. In dued cost of living crisis and prioritizing the step that empty my eye said by a flat and pay for a course that would allow me to change careers. Again,
well done. If I've been prioritizing my SIP, I know that an iSER isn't really equivalent to the US roth IRA, which is more of a dedicated retirement wrapper, and maybe a Lisa is better. So I think the question really here is what should I do? Should I keep putting money into a SIP. Should I go for a Lisa or Elsa?
What do you say, John, I mean, I thought this. I thought this was an interesting point.
I'm asking you how to pronounce Lisa or e Lisa.
Oh. I would go with Elisa Elisa because Isa meiser Lisa. I mean Lisa kind of makes more sense. But Lisa Isa.
Anyway, Either way there's that. So his question is should his after his eight percent enrollment, should it go into an ISA, should it go into ALYSER, or should it go into a SIP. I know what I think? What do you think?
We honestly, the fact that they've already got eight percent or to enrollment, my preference would be to go for the iSER. Also, I mean ELISA would be good because they can still get one at the age and then you get that bumped top by a thousand pounds.
You know, I am very suspicious of the LISA. So Eliza is it's a lifetime ISO, right, and you can put four thousand pounds a year into it if you're under forty, I should not.
Sorry, hold on you. They've already bought a flat. You already got a flat, okay in that case, So yeah, the reason why you have to hang on't it.
Yeah, but there's more reasons to be suspicious of it anyway. Right, So you can put him four thousand pounds a year that comes off your twenty thousand pounds allowance. If that leads you sixteen thousand pounds your normal Liza put in your four thousand, and the Government's like, this is so great, we're gonna prop you up. We're gonna put twenty percent on. Now you've got five thousand pounds hooray, right, exactly four
that you have to spend it. I have take it out, put it on deposit on a house or a flat, but only up to a limit of four hundred and fifty thousand pounds and are very successful person here maybe wants to buy a house more than that valued.
And also yes to a frost tame buyer, you have to be a first time buyer. Will not anymore or you can't take it.
Out until you're sixty. And if you think that a normal FIP or a SIP or an actual retirement product, actually for this person it'll be I think fifty seven because that's where it goes up to in twenty ninety eight, right, and it may go higher than that, but nonetheless your money is tied up for an extra three years. Now, if you change your mind, with a normal ISA, you can just take the money out, no problem, no penalty,
I think going on that. But with this, if you take it out, they charge you twenty five percent of the value of what you take out. And you might say, well that's okay, I got topped up to twenty five percent, But of course that's not how percentages.
Work, is it.
So they top you up by one thousand pounds. Now you've got five thousand pounds, and maybe you make some returns on that. But let's say today's a five thousand pounds you want to take it out. They're taking away twenty five percent. How much are they taking not one thousand pounds but one two hundred and fifty pounds, And for me that is a deal breaker. That is a deal breaker. So you effectively do not have access to your money without paying fairly substantial penalty or waiting into
your sixty So I would never take that. I don't think opinions may differ over an ordinaryiser in the first place.
Not you're really I think especially the fact they've already bought a host, because I think that's we are done, may be a deference. But basically what they're saying is that, well, should I put as we form my retirement? You're like, well, actually, you get the same benefit if you put it in a set And the only may not problem is that you have to keep it for retirement rather than being able to take.
Anyway. And in fact, I'm slightly assuming, given at this and totally on top of everything, that they're going to be a higher rate taxpayer anyway, in which case.
Yes, oh yeah, exactly, Yeah.
Might well put money into the SIP rather than into a LISA. However, choosing between a SIP and an I sir, yeah, I said, I.
Sir, noose theizes because of the political risk. However, there is there's another wrinkle here low because well, it depends on what they're earning at the moment, because so they're getting ready salary sacrifice in twenty twenty eight, sorry, not getting ready at but cutting it right down to two
thousand pounds from at the moment unlimited. So my inclination, especially well if you're a higher earner, as I suspect this person is, would be to overweight your pension contributions while you can steal salary sacrifice, because for example, if you're ran over one hundred thousand pounds, you want to if you can do salary sacrifice to get your number
down to below one hundred thousand. So I think that is the one issue that's worth considering here because normally I would say you're putting plenty in your pension there's political risk with a pension that you don't get as much by an iSER, so fill up your eyes instead. But for just this time being, before the salary sacrifice rules get cut, it might be worth putting more into your pension, you know, depending on exactly where you are on the salary bind Yeah.
And the political risk is the constantly changing rules. Yeah, on annual allowances, on lifetime allowances, you know something, they take them away, they put them back, the change the level, et cetera, et cetera. And there's also, of course the longer term political risk that it may be that your pension money is mandated dishifting.
Shifting or the other.
I mean, there's lots to talk around this on different types of pension, and no one has yet said, by the way and just sip, you know, this could eatually be coming.
I think people don't think about political risk enough because there's a sense of I mean, I think maybe they do now because politics has got quite a bit more chaotic. But for example, if say the Green Party did win the next election, and say the Labor Party had managed to push through the pension mandating, then you know, you don't know how much your pension might get harnessed to
you know, building windmills or whatever. And I think that that's well, that's the main reason to be more worried about a pension, and.
There's more of a financial oppression risk with a pension.
Yeah, it's absolutely and that's only because you can basically instantly access your eyeser because there's plenty of things they can do to screw up your eyes as well, but if they do it, you can take the money out. Where there's a bit of pension, you really are stuck. And also, pensions are very visible form of wealth. And the problem is it's a visible form of wealth. It really just depends on what age you are. You know.
It's like if you've got, you know, a few hundred thousand pounds in your pension, it's probably just because you're a bit older than you've been working for longer. It's not necessarily because you are inherently rich. But it's just money that's just sitting there in populous Politicians can kind of shout about how wealthy you people are and take a chunk away from it, and the lobways have somebody supporting them who has less money than you. So I do think that's definitely worth thinking about.
So I think that's pretty straightforward.
M Yes, I think so, No, sir, No, sir, and.
Longer term prioritize and ice river sat. By the way, these are purely opinions. This is not advice. John and I are absolutely not giving you financial advice. We are simply riffing on our own opinions around these different rappers.
Yes, and we are. Actually I would say in place that a twenty nine year old is this together to be able to put together even an email like that? And saying that, and I think they probably old lady with the answerism, I'll just reassuring them.
Yeah, we're very admiring with the young now wor old enough to call people younger than us the young, aren't We definitely right? Thanks for listening to this week's Mary Jogs Your Money. If you like ours, share, rate, review, and subscribe wherever you listen to podcasts. Although we should follow me and John on Twitter x at maryns W
and John Underscore step Back. This episode was produced by Samasadi and most of the questions to was on this show and flattery of course and all our shows always welcome our show email is are in money atliebook dot net
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