Understanding Lifetime ISAs and Financial Planning

It’s another Q&A, and this week’ we’re talking Lifetime ISA withdrawals, whether you need life insurance and the NHS pensions scheme, among other things!

Shownotes: https://meaningfulmoney.tv/QA8 

01:08  Question 1

I just wanted to start by thanking you so much for your podcast. I'm probably one of your younger listeners, having started listening to you when I was 26. I feel very fortunate to have discovered your podcast at such a young age, as it means I will hopefully have years, if not decades, to put your excellent advice into practice.

I have a quick question that I was hoping you could help me with. I currently have a LISA that I was planning to use as a deposit for a house. However, I am now planning to move to Australia permanently with my Aussie fiancée. I have separate savings that I can use for a deposit now, but since ISAs are not recognised in Australia while UK SIPPs are, would it be wise to take the 25% hit by withdrawing the money from my LISA and transferring it into a SIPP to benefit from higher rate tax relief and continued tax advantages?

I understand you cannot offer specific advice, but I would be interested to hear if there are any general pitfalls or advantages in this plan that I should be aware of.

Many thanks! Simon

04:40  Question 2

Will try to keep this brief but is challenging.

Do we need life insurance?

If I die whilst employed my wife gets a lump sum which will cover our only debt the mortgage through my DB pension scheme.

If I retire aged 60-65 my lump sum will cover any mortgage remaining if still have one.

My wife has no such pension / cover if she were to die (currently between jobs).

I have emergency fund / Overpay into pension for tax relief & child benefit purposes / and recently opened stocks and shares ISA for myself and  2 children. Age 39 trying to build for future but started late :)

Many thanks Lee

09:55  Question 3

Many thanks for all the ongoing information and discussion, I’ve been listening for years, but still learning and trying to put into practice all positive behaviours (just like with diet and exercise, knowing and doing are rather different!).

A question and a thought.

Question; (apologies, after I typed it, it turned out to be very long and NHS specific so feel free to ignore, but I think the point about revising tax returns after submission when new info comes is more generally applicable).

I’m in the NHS pension scheme and am awaiting my RPSS after McCloud judgement. They were due by October. It’s November and I haven’t had mine (many others say the same). I believe they are prioritising those with who have definite AA charges and I doubt my NHS figures trigger that as I was part time for much of the relevant period.

However, I also contributed to a private pension every year, the amounts varied, but were usually calculated quite closely using the AAPSS that I had at the time to maximise residual allowances - so basically I think I may now have Annual Allowance issues that I didn’t at the time, but am not being prioritised by the NHS pension scheme for a new statement because they don’t know about my extra contributions.

Added to this I have already submitted my 23-24 tax return before I realised there might be a problem. Others have added a comment to theirs essentially saying ‘watch this space for more information’ and apparently have 12 months to amend them once their RPSS arrives.

So, the question is, can I still change my tax return (submitted on behalf by my accountant if that’s relevant) if new information becomes available after Jan 31st (or even in the new tax year)?

Do you have any advice for those waiting documents from the NHS pension scheme or insider knowledge re. Timescales for remaining documents? Anja

13:28  Question 4

Thank you so much for an amazing podcast!

My question…

After 7 years of a long distance relationship, I’m  talking to my partner about moving in together.

Apart from checking your significant other listens to the podcast (mine does - phew) what are the most important areas to cover when thinking about joint finances, particularly if you haven’t talked much about money before?

Thank you!

Elizabeth

19:07  Question 5

Hi Pete and Roger!

Thank you so much for the show. I’ve been listening for the past 6 years and have gone from saving for a house to learning about pensions and now actively pursuing building my pension and ISA pots so that I can be ‘work optional’ as soon as possible (hoping to be there in 5 years and would not have known where to even start if it wasn’t for your podcast).

My question is how does the actual mechanics of drawing down from a pension work? Is there an equivalent of PAYE for pension draw downs? How is income tax calculated and collected? Would a tax return need to be done?

Thanks so much!!

Gavin

24:07  Question 6

I am approaching the Lifetime Allowance (used 91.43%) but my Armed Forces Pension tax-free amount I received was less than the 25% for the amount of LTA used ( 58.96%). I have a Transitional Tax Free Allowance Certificate to ensure I am still able to receive the maximum tax-free amount (£268,275).  I have currently received £168,932.69 as a tax-free amount.  In order to realise the maximum tax-free amount I will need to exceed the LTA by £259,143.76. Finally, I am still able to max out my contributions each year at £60,000 to help reduce my tax bill.

If I continue to max out my contributions each year and exceed the LTA to realise the tax-free amount, what are the implications of this or should I consider paying the money into other investment accounts?

Regards, Martin