Tuesday 12 April 2016 telegraph.co.uk Isa ideas Rich & famous Pensions & Isas Why property Our experts Special Report has a place in offer advice Eight pages of help and advice on investing, saving and making the your portfolio to celebrities most of the new pension freedoms page 3 page 6 Pensions doctor Brexit and money a sk an exP ert investing advice c omment Your moneY My choice of Isa vs Lisa investing The new Lifetime Isa is an attractive and flexible home for long-term savings After a bit of thought, I’ve devised my plan for how I’ll use the tax-free options to save for my retirement. Here I explain my thinking. A new way to boost your saving My saving until now has been simple. I maximise the benefits of my company pension scheme – which invests in global “tracker” funds – and then save what I can into a stocks-and-shares Isa. I have ring-fenced cash savings By ed Monk equal to two months’ salary and investment editor contribute to savings accounts beyond that. I look forward (career progress permitting) to putting eporting on the more aside, specifically inside a nation’s personal self-invested personal pension (Sipp) finances, you grow that I’ll run alongside my used to being asked investing Isa. for informal advice My earnings mean contributions about money. I’ve will get the benefit of higher-rate tax learnt to boil it down to a handful relief. This relief has made a pension rof rules that I know will do some the best place for very long-term good, and then explain that the saving – until now. complicated stuff is best handled by an independent financial adviser. Tax relief vs top-up A recent change announced in the Like a pension, Lifetime Isas boost the Budget, however, has made me value of the money you contribute reassess my tips. In fact, it has made but the two work in different ways. me question how I will arrange my Pension contributions can be made own finances in the years ahead. from pre-taxed earnings. The boost The introduction of the “Lifetime this gives pension savings is highly Isa” has created a new home for long- valuable. A higher-rate taxpayer like term savings beyond the existing Isa and pension tax “wrappers”. Continued on page 2 jones sarah * * * * * * * * * * * * * * * * * * * * * Tuesday 12 April 2016 The Daily Telegraph The Daily Telegraph Tuesday 12 April 2016 * * * Your MoneY Your MoneY InvestIng Ideas Editor Your Money Investment & Pension Email [email protected] Andrew Oxlade Special Reports will be published on Tel 020 7931 3532 Designer Tuesdays throughout 2016 at intervals telegraph.co.uk/money Elma Aquino of about once a month. and the fact that pension withdrawals – which all experience tells me want to draw on retirement savings basis. Beyond this, the uplift from are paid 25pc tax-free. will not happen. before that. The current rules will current levels of pension tax Isa vs Lisa – my choice Calculations by Fidelity show that Pension tax relief in its current allow pension savings to be accessed relief means the bulk of my other I’ll still gain the most from pensions, form survived a rumoured cut in the from the age of 57, three years ahead long-term savings will still go but only if my tax rate is lower in recent Budget and the Government of the age-60 entry point for Lifetime here – for now. Living as a basic-rate Is commercial property safe as houses? Continued from Page 1 and the top-up combined. retirement than in my working life. As has consulted on changing the Isa savings. taxpayer in retirement means that To be eligible for the top-up, though, a 40pc taxpayer now, the net boost in system to make it “sustainable”. A Pension withdrawals in this period money contributed is boosted by me sees a £100 contribution turn you must withdraw money either to retirement from tax relief is 41.7pc, cut in tax relief for people like me is that take me above the higher–rate 41.7pc – far better than the 25pc into £167. Money contributed can buy your first home or, after the age of so long as I pay basic-rate 20pc tax not merely possible, but probable. threshold would face more tax, from a Lifetime Isa. Around £150 a It’s also worth noting that sales of then grow tax-free until I retire. 60, as retirement income. If so, the when withdrawing money. Were that to happen, a Lifetime Isa whereas Lifetime Isa savings month will go into a Sipp. It’s popular as a bond substitute property funds dipped recently with Once I get there, however, there money comes tax-free. would be tax free. This would be I will, however, be opening one uncertainty about the Brexit vote and Annual total returns from commercial property SouRcE: IPD uK PRoPERty INDEX is income tax to pay at whatever The money is accessible sooner The value of flexibility particularly valuable if I needed a of the new products while I have the and as a way to spread risk. how the outcome in June might affect rate my earnings and pension and does not have to be spent on a If I were lucky enough to remain in ‘Lifetime isas give a large amount all at once. chance and paying in each month. demand for building space. income take me to. property, but this triggers a 25pc the 40pc bracket in retirement, the Contributions will be set far below Kyle Caldwell looks at the options Lifetime Isas will work differently. tax charge. This wipes out the original pension boost would fall to 16.7pc 20pc boost to what How my plan will work what I pay into pensions – around How much, and where? Here the boost to saving is a 25pc top-up, all the growth on the top-up – below the 25pc boost I would enjoy I will continue to pay in enough to £50 a month – but I’ll stand ready The proportion of your money top-up to anything you have and another 5pc of your fund. from a Lifetime Isa. you’ve contributed’ company pension schemes to to increase them if pension tax relief nvestors have been piling that should be sunk into property contributed, applied once a year. As I have already bought a property, If my earnings fall in my working maximise the advantage of matched should be cut. into property – and not depends on timescales and what you A total of £4,000 can be paid in each I would need to leave a Lifetime Isa life so that I once again pay 20pc tax, becomes more attractive. contributions. This accounts for about I value the flexibility that Lifetime just Britain’s overheated want to achieve. Financial planners year, meaning a maximum boost untouched until age 60 to benefit. and I continue to pay that rate in As well as rule changes, I must also £350 of take-home pay each month. Isas add to my savings. If my housing market. In the say the average investor’s portfolio of £1,000. You can open a Lifetime retirement, then the Lifetime Isa deal with the uncertainty of my own Beyond this, I hope to set aside earnings are higher in retirement, past year, £2.2bn has been should dedicate between 5pc and Isa up to age 40 – which means that The tax calculation again becomes even more retirement, including when I will be around £500 each month, or more or lower in my working life, than I invested in property funds, 15pc. Chase de Vere’s models suggest I’ll still have a few years to get one The answer depends on the level of advantageous – the 25pc boost easily able to retire and my level of income if future earnings permit. plan for, the benefits are better according to the Investment a medium-risk investor should have after they launch next year – and the tax I pay, both in working life and beating a 6.3pc gain from pensions. as I approach that point. With my cash savings already than a pension. And it gives me Association, the trade body. 50pc in shares, 40pc in bonds and contribution builds until age 60. retirement. You need to compare the The financial benefits of each route My state pension age is 32 years accounted for, around £300 of options if I wish to withdraw some The vast majority of these 10pc in commercial property. For The money can be invested Lifetime Isa boost versus pension tax depend substantially on the current away, when I’ll be 67 – although 68 this will go into a stocks-and-shares money while I’m still working. funds invest in commercial property, a high risk investor, this swings to and savers get the value of any relief for each type of taxpayer, taking rules and rates for each system or 69 is more likely – and a fall in Isa, where money is available with buying actual buildings such as 75pc, 20pc and 5pc. growth on their own contributions into account tax relief at current levels remaining the same until I retire salary could mean that I would no strings attached on a continuing [email protected] Ioffices, retail parks and student Ms Gee tipped M&G Property accommodation. The other fund type (yielding 3.3pc) and L&G UK Property owns shares in property companies, (2.9pc). These are two of the biggest such as Land Securities.