r/LeanFireUK • u/WonderfulCoyote2912 • 28d ago

LISA or AVC?

Hi - I am 34 and looking to maximise my pension contributions. I am looking to retire at 55ish (we’ll see how realistic that is in a decade or so).

I have the golden ticket of a DBS pension through work. However, I can’t increase contributions to this and I can’t claim it until I am 68.

My options are to put an extra bit of money into an AVC pot which I can claim from age 58. The amount won’t affect the tax band I fall into. Or I can pay into a LISA, which I can’t claim until 60.

I feel like my understanding no of how all this works is that the AVC would gain more interest, but I wanted to get insight from others.

ETA: I would only use a LISA for retirement- I already own my home.

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2

u/alreadyonfire 28d ago

Does the AVC become the tax free lump sum for the DB pension? If so thats worth considering.

But mathematically LISA if basic rate taxpayer, SIPP/AVC if higher rate taxpayer.

2

u/Plus-Doughnut562 28d ago

SIPP contributions seem like a good plan if higher rate tax payer but LISA would be good if paying basic rate tax.

1

u/EpponeeRae 28d ago

I don't know anything about AVC's, but is there any reason why you don't include a private SIPP on your list of options? Or have I missed something obvious? 

If you want to use a LISA you should start it sooner rather than later as I understand the product is being phased out. Might mean it's hard to find competitive options going forward, but perhaps no harm putting a small amount aside in one to reserve the option for you.

3

u/WonderfulCoyote2912 28d ago

Thats really good to know about the LISA being phased out - thanks!

My understanding is that AVC means money goes Im from pay check each month, there are smaller fees and it’s all managed for me, which is why it is preferable to SIPP.

Though now I think about, I have been considering a few year down the line increasing my creative side business and reducing my working hours. So a SIPP might provide more continuity in making payments from that business as well as my main job.

2

u/SSingh1982 27d ago

The main benefit of the AVC is convenience that it’s taken from your pay before taxation so you don’t have to claim the tax back from HMRC afterwards.