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We talk about the best strategies for making the most of your money and Maren's umset web and with Me Senior Reporter and Money to stilled author John Steberg.
Hi John Hi Man.
Right. So, last week we answered a big pil of questions, are attempted to answer a big pile of questions. We get so many really interesting questions and comments coming into the mailbox, which we really really appreciate. So we spoke
about a whole little topics last week. But this week I really wanted to address the whole Isa Lisa's sip thing because we did a podcast you and I got I can't remember, maybe a few months ago now, where we talked about the the Lisa the lifetime is sa Li said Lisa, we got.
I think everyone ever ever agrees on.
That anyway, whatever it is, the Lisai Lisa Lifetime iSER the one where if you're under forty you can put what is it, four thousand pounds a year and government tops it up by another ground. You get a twenty five percent contribution, and so you can contribute until your you can open it until you're forty, contribute until you're fifty, I think, and then you can use it to buy a house up to a value of four hundred and
fifty thousand pounds. And if you don't do that, you can leave it in and then take it out on retirement, but slightly later than the SIP, so I think it's sixty. You can then take that money out and you and I would be like, well, I don't know, because you can't take it out until you're sixty, So why wouldn't
you just use an ordinary sip. And if you take the money out without spending it on a house before you're sixty, you lose all the contribution, and so you can end up losing a reasonable amount of your own money. And then of course if you don't buy the correct priced house, then you also lose money. So we talked about this and we're like, oh, I don't really know about that. Doesn't seem doesn't seem all that, But a
lot of people disagree with us. So I wanted to just run through some of those emails and explain why some people just think that we're wrong to be sniffy about it, and you know, probably we are.
I don't know. I just seems to need to be complicated and risky. But anyway, here we go.
So here's one from James. He says, I really enjoy the show excellent. I understand the points that you make. However, anyone under forty who has bought their first house already.
Should still consider using one.
Why because you get twenty five percent return almost immediately on a four thousand pounds annual basis, So it's not like in most things the return is spread out over the year. It comes to you in a honner, so then you're effectively making the return on five grand for the full year. So the contribution and the top up are literally invested from day one, and on his sums, the net result is an additional thirty four thousand, seven hundred and nineteen thanks to the precision available in your
licet for use in retirement. So he's made it. He's made an assumption of returns and if you have to put that return up, obviously it would be further. And his overall view is that you should put whatever you can into a SIP first so you can reduce your high additional tax rate impact and claw the tax pack, etc. Of course, and then four thousand pounds straight into your list and then everything else into your eyesep I'm interested in that way around because you know, not everyone agrees
with that. Now now that the SIP is not IHT efficient, a lot of people are, so how much you put into your step? So that's interesting, right onto the next one, and then I'm going to ask you what you think about all this, John. I've been a fan of you and John Stuffick since the Money week Days and rarely miss a podcast.
Excellent, that's what I like to hear.
He again is asking about the same thing, and he says that he thinks that we've been a little down on the LISA. He said, what works for him is that you can take it in time hirely tax free at sixty years old, unlike with a SIP, when, of course you only get twenty five percent tax free and you have to you have to pay your marginal rate of income tax on the rest. So in that sense he reckons that the the LISA is more or tax efficient for lower rate taxpayers than a pension. He also
says that he thinks that the tax free. Status of past contributions to ALYSA looks more secure to me than that of a SIP, so it's less likely to be fiddled with, which I think we might agree with that to you, because we've always said that we think the government will come for is as lost because everyone understands ices, everyone gets iOS, and everyone feels their ices are very much theirs.
Whereas are smaller.
Yeah, and Simpson pencils are a little bit more distant. He also says, with serious ill health, you can accept your Lisa penalty free, and an extremists you can access the funds anytime with that twenty.
Five percent penalty.
Yeah, so you know, to my mind, this penalty can actually be a good thing for young people using ALYSA for a time and saving stopsum dipping into the pot for holidays, et cetera. So in that sense is better than an ordinary ism. There again, okay, I'll give you that. I'll give you that. And finally he says that non taxpayers can only pay eight hundred and eighty pounds into a SIP, but they can add a further four thousand
pounds into a liser. Of course, we could say, well, you know, you can put twenty grand into an ordinary, I said, but this does give you that tax back, so.
You know, yeah, okay, I get that.
And by the way, something that wasn't clear on the podcast, although I think I did say just now, was that the LISA can be opened until you were forty, and once opens, you can contribute until you are fifty. So I think good points, particularly for lower rate taxpayers there.
I wouldn't disagree with any of those. And I think there was a that's a particularly good point about the the political risk, the lyser and also the fact that you can take the whole thing tax free whenever you're sexty, only get the twenty five percent lump someone the SIP.
So yes, we were probably a little bit harsh, and I actually thought the other point that the latter podcast listener made was that if you're paying into a kind of pot for your spouse who's a non taxpayer, on your kids, even you can only put two eight hundred equidity SIP, which then growsed up to three six, but you could put the full four k and Eliza, and again that's effectively a pension contribution with a different kind of like tax status at the end. If you're talking
about for a non working person. So that's something I hadn't thought of, and actually I think makes quite a lot of sense. And yeah, and obviously if you've got these allowances and you've used them all up already, then it is worth using up. This is an extra chunk, A lot comes off your eyes.
Allowance if Yeah, okay, so we were a little harsh. We were a little harsh.
I'm not one hundred percent convinced, but I do take all those points. I do take them. We were a little harsh.
Yeah, I suppose the other issue is dislike a fiddliness.
Yeah, we hate field, hate fudge, hate admin.
There's a slight and sorry for teen his name and being the Martin Lewis noess about the whole thing of Okay, you need to do it in this or order and you need to can I fill this one up, but don't put too much in this one and then compare the you know, et cetera, et cetera, and the element you can I spend in an awful lot of time to say something it's terrible says, but as to whether you can be bothered, there's something they take out their
account here by doing those are all reasonable points. And these are bigger sums than just you know, switching bank account.
Regularly, just switching energy providertly. If the numbers were here correct, which I'm sure they are because our readers are very, very literate.
Thirty four pounds.
It's a cruise, Joe, many cruises. It's three months on a Disney cruise ship. Again, adult Disney is a thing.
It's really you just put me right off.
It's the norlwedge of fuels for us, John, Thanks for that.
Everybody, any more comments on licens and isis do send them in because you know, obviously this is a naughty issue. But thanks for all those emails.
Thank you, John.
Thanks thanks for listening to this week's Marrion Dogs your Money. If you like, I'll show, rate, review and subscribe wherever you listen to podcasts. Also, be sure to follow me in John on x or Twitter at marins w and John and the Score step back. This episode was produced by some Sidy and Moses and questions and comments on this show and all our shows are always welcome. Our show email is Marin Money at Bloomberg dot net.