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Pension planning: Lifetime ISA 'rules for retirement' shared as retirees struggle with tax

Pension planning: Lifetime ISA 'rules for retirement' shared as retirees struggle with tax

In April, HL surveyed 2,000 people and the results showed almost half of basic rate taxpayers don’t know the most tax-efficient way to save for retirement (43 percent) and only one in 20 people think a Lifetime ISA might be the most tax-efficient way to save for retirement (six percent).

Sarah Coles, a personal finance analyst at HL, commented on these results: “We haven’t a clue about the most tax-efficient home for our retirement savings.

“As a rough rule of thumb, for a basic rate taxpayer you get the biggest tax boost in a LISA and for a higher rate or additional rate taxpayer it’s a pension. But when asked to pick the most tax-efficient for them, half of people didn’t even want to hazard a guess, while among those who took a stab at an answer, only five percent of basic rate taxpayers picked the LISA.

“It’s hardly surprising there’s so much confusion, because when you’re weighing up the tax benefits of each, they aren’t even explained in the same language.

READ MORE: State pension claimants can get a number of benefits in retirement

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This post originally appeared on Daily Express :: Finance Feed

'I worried about funding retirement' Man explains why he set up second pension at 24

'I worried about funding retirement' Man explains why he set up second pension at 24

Retirement is clearly a long way off for the retail store assistant, however that’s not to say it isn’t something he’s already thinking about. Like many people his age, Matt pays into a workplace pension via auto-enrolment.

“The reason I set up another pension is because I don’t want to worry about money when I grow old,” Matt exclusively tells Express.co.uk.

He added that setting up another pension was the best option for him.

“Even thought retirement is a long way off, I feel like now is the best time to sort things out for the future, because we never know what the future holds for us.

“I’d rather be safe than sorry.”

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Pension saving hasn’t so far been without challenges, however.

Matt explains there has been issues “now and then,” due to the coronavirus pandemic.

“I wasn’t working many hours in certain months, so there were times where I was worried I won’t be able to contribute as much as I would like to,” he tells Express.co.uk.

However, the Covid crisis has also served as an important reminder about the importance of saving for the future.

The digital pension provider, recently authorised by the Financial Conduct Authority (FCA) to run and operate its own SIPP, originally opened for the self-employed in 2019.

In 18 months, Penfold amassed 25,000 customers, 80 percent of which are self-employed.

Commenting on the research, Pete Hykin, co-founder at Penfold, said: “Self-employed workers have had to battle hard to stay afloat throughout Covid-19, but even a protracted global pandemic hasn’t stopped them from contributing to their pensions.

“We’ve found that, without the safety net of salaried employment, self-employed people tend to be more conscious of their day to day finances and more interested in actively safeguarding their future – particularly given their vulnerability to external shocks such as Covid-19.

“And it’s young people that are proving most engaged. Our under 30s customer base has grown 15x since the start of the pandemic, and their average monthly contribution has increased by 60 percent during this time, from £76 a month to £121.

“It’s great to see, but the pensions industry also needs to do more to reach out and engage young people. Providers need to make their pensions relatable in the here and now, instead of focusing on a distant point in the future.”

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This post originally appeared on Daily Express :: Finance Feed