Lifetime ISAs guide

From an HMRC perspective it's the same LISA transfering between providers. You can continue to contribute to it up the the annual limit.

I don't have a Skipton LISA but many providers will tell you how much more you can contribute based on what they have been told by your previous ISA (HTB and LISA) providers.

I assume your situation meets all criteria for using the HTB ISA against the property purchase.

You need to have had your LISA open 12 months before it can be used to purchase property. The first bonus relating to this tax year (and previous if transfering an old HTB ISA) is due in late April or early May. After that the bonus is due 1-2 months after the contribution so May or June at earliest.

This is the first time LISA bonuses have been paid so there is possibility of unexpected delays with some or all providers.

You would need to transfer the LISA to Skipton then transfer the HTB ISA to Skipton ASAP as they gave a cutoff date in a months time. It's always the gaining provider that arranges the transfer.

Alternatively use the HTB ISA for the property purchase and use the LISA to invest for retirement alongside a workplace pension.

So if your offer had been accepted, for your situation, do you expect to be able to hold back on using the money until May+? How established is your chain, etc?

Alex

Yes if your total HTB transfer with interest is less than £4k and you don't intend to add any more this tax year that's fine you are definitely under the LISA limit for contributions this tax year.

However get the transfer going asap and give Skipton as much notice as possible to get their work done. You can always add your Feb/March contributions to the LISA once transferred by 5th April.

If all your contributions were made this tax year you will have a full £4k LISA allowance next tax year. Given the low interest rate you might be better putting the money into the LISA as a lump sum towards the end of the tax year in future so it can earn better money elsewhere in the meantime.

It is tricky with being 5 years away from purchasing - too short for S&S without risking a loss and too long for cash at a rubbish interest rate. No perfect answer for your situation.

Alex

Cash-Strapped.T32 wrote: »

Yes, I agree that the time-frame isn't ideal - if I knew for certain I was going to be looking at 6-7yrs plus I'd jump at a S&S LISA right now; In fact, indecision over whether to go cash or S&S is why I've waited this long to set up my LISA in the first place..

The larger part of me is saying settle for cash and just be happy with the 25%, but the smaller (yet more vocal) part of me is saying push my timeframe out to that 6-7yrs & go S&S... Gah, decisions!

In your position I wouldn't be happy having at least 5 years in which my money was being erroded by inflation. That's likely to be at least a 10% drop in spending power.

Historically over a 5 year investment period in global shares you would be around 10% likely to end in a loss position. However historically the loss at the end might be as much as 30% (say a 50% drop after a few years of low returns, etc).

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

One consideration is that a balanced investment in stocks and bonds on a traditional 60/40 ratio within a S&S LISA wrapper is going to be a lot more stable than a 100% equities investment. Your probably of loss over 5 years is still probably around 10% but the extent of the loss should be lower. With regular contributions you will also benefit from pound cost averaging.

It's also worth remembering that when stock markets drop badly you sometimes see drops to a lesser extent, across other asset types such as bonds and property. So even if your LISA drops (a bit less because it's balanced) then maybe the price of your purchase might have also dropped so everything is still relative. Still every market correction is different.

If you do go S&S remember Nutmeg don't accept HTB transfers and AJ Bell charge £1.50 per trade so HL is probably your best option for regular contributions. In your position I would consider investing in a balanced fund such as Vanguard LifeStrategy 60. I wouldn't go too heavily into 'safe' bonds as that strategy would carry it's own risks and the upside is limited.

If you do well in the first couple of years maybe move back to cash for the last few years to protect the gains from a drop at the end.

However I am not allowed to offer advice, just raise options and considerations and give my thoughts. It's your call on risk of downside for potential return.

Whatever you do - good luck!

Alex.

Yup. Is a question on if you just accept defeat or risk it for a potentially greater prize.

A further option would be to gradually move the 60/40 portfolio to cash over the years - say 1% per month so you have more certainty of outcome for the final years? Again these trades would be free on HL.

If you are only investing for 5 years or less also worth considering account closure charges so maybe build a spreadsheet to determine if AJ Bell or HL work out cheaper for your situation.