Lifetime ISAs guide

eskbanker

snowqueen555 wrote: »

I meant to say a cash LISA.

Some places don't accept transfers in, there isn't a lot of options.

There are only three providers of cash LISAs: Nottingham clearly states that it doesn't accept transfers and Newcastle suggests not, by omission, so that leaves Skipton, which does accept transfers, so you have exactly one option....

jasdev

I have very mixed feelings about the LISA product, but it seems foolish to completely ignore a free 25% annual bonus on my savings.

Renter, not a homeowner, though currently renting under a scheme for people earning £30k-£39k with a max. tenancy of 3 years (reviewed annually) designed to help people pay discounted/intermediate rent and save up for a deposit.
So time horizon is another 2 & 2/3rds years at most, though possibly as little as 8 months if my income increases above the threshold before July. There's always the chance that I could continue to rent a 1-bed privately after my scheme ends, though in London this would be seriously expensive.

Intend to continue to save into my S&S ISA with Vanguard on a 100% equities LifeStrategy fund until I use the proceeds towards buying a flat.

However, as good as the LifeStrategy 100% equity returns have been in certain years, they probably won't be as good as 25% annually! Hence, I'm considering a cash LISA.

Anyone in a similar situation saving for a deposit and confused about where to stash their spare cash?

eskbanker

jasdev wrote: »

I have very mixed feelings about the LISA product, but it seems foolish to completely ignore a free 25% annual bonus on my savings.

[...]

However, as good as the LifeStrategy 100% equity returns have been in certain years, they probably won't be as good as 25% annually! Hence, I'm considering a cash LISA.

It's not 25% annually, it's a one-off 25% on each individual contribution you make....

jasdev wrote: »

So time horizon is another 2 & 2/3rds years at most, though possibly as little as 8 months if my income increases above the threshold before July.

You need to have a LISA open for 12 months if you wish to use it without withdrawal penalties.

jasdev wrote: »

Intend to continue to save into my S&S ISA with Vanguard on a 100% equities LifeStrategy fund until I use the proceeds towards buying a flat.

A very high risk strategy if you're planning to buy within the above timescale!

masonic

jasdev wrote: »

However, as good as the LifeStrategy 100% equity returns have been in certain years, they probably won't be as good as 25% annually! Hence, I'm considering a cash LISA.

You don't get 25% annually in a LISA unless you save for only 1 year. It is a one-off bonus, which is diluted the longer you hold the account. However, the return is risk free, unlike VLS 100% Equity. Investments in equities are unsuitable for someone aiming to invest for just 2-3 years and there is a significant chance such a short term investment would lose money.

Alexland

Ditto even medium risk S&S investments are not suitable for short periods of time so you are taking a complete gamble with your money. It might pay off or you might end up poorer.

jasdev

Ah, so the ISA was opened almost one year ago, when I was still sharing a flat with strangers.
I’d received a gift and intended to put it towards saving for a deposit on a flat, but I fully expected to be stuck in flatshares for the rest of my 30s, so this was a 5-10 year horizon idea.

I was lucky to find out about and successfully be accepted my the housing scheme I’m on, but if I was still sharing I’d not be looking at a time of 8 to 28 (absolute minimum to absolute maximum tenancy) months.

masonic, when you say that the one-off bonus is diluted the longer you hold the account, are you referring to inflation, or something else?

I mentioned, for completeness, that my remaining tenancy could be as short as 8 months, although this would only happen under the present rules if I get promoted twice at work (highly unlikely!) or if I take a job elsewhere (the risk of losing my present sweet housing deal outweighs any additional salary I’m likely to get).
For now I’m more concerned about (low probability of) a change in the rules by my landlord but won’t really know about that before we discuss renewing the tenancy agreement in the summer.

Also, I’m content with the risk of my ISA position so far; sold a portion at 5% profit in the Autumn to finance moving and new tenancy costs, but thanks to the trade war jitters and Brexit uncertainties lowering the value of my entire portfolio, I was able to buy back many more units of the fund for the same cost, and now it’s back up 5% again. Though you’re all correct, it could go South again for some time in the next 2-3 years (!) but this is a risk I’m prepared to take for the potential upside.


Also kudos to eskbanker for a wonderfully appropriate avatar

masonic

jasdev wrote: »

masonic, when you say that the one-off bonus is diluted the longer you hold the account, are you referring to inflation, or something else?

I'm ignoring inflation for this purpose. I'm merely pointing out that you only get 25% once on each contribution you make. That means that if the money is there for several years, you would not need to achieve a 25% return per year elsewhere to match it. In the extreme case of holding until retirement, the 25% would be equivalent to an annual rate of about 1%, in addition to interest / investment returns.

I mentioned, for completeness, that my remaining tenancy could be as short as 8 months, although this would only happen under the present rules if I get promoted twice at work (highly unlikely!) or if I take a job elsewhere (the risk of losing my present sweet housing deal outweighs any additional salary I’m likely to get).
For now I’m more concerned about (low probability of) a change in the rules by my landlord but won’t really know about that before we discuss renewing the tenancy agreement in the summer.

Also, I’m content with the risk of my ISA position so far; sold a portion at 5% profit in the Autumn to finance moving and new tenancy costs, but thanks to the trade war jitters and Brexit uncertainties lowering the value of my entire portfolio, I was able to buy back many more units of the fund for the same cost, and now it’s back up 5% again. Though you’re all correct, it could go South again for some time in the next 2-3 years (!) but this is a risk I’m prepared to take for the potential upside.

In your position, I'd relent that my circumstances had changed and while a S&S LISA was appropriate to my original objectives, it may not fit the bill now. You can transfer to a cash LISA at any time and it could be preferable to having to delay your house purchase if markets tumble.

snowqueen555

The lack of adoption from insitutions is a little worrying, it is probably a bit of a nightmare to run.

I am all in cash for my Lisa with HL, so no interest at all. I am being optimistic in it is possible I might be using it in 2-5 years.

aj23_2

Wondering whether to make a LISA deposit in April or hold off until March next year.

Currently have £4000 set aside ready to deposit from my Leeds BS Issue 4 for the next tax year, and £15000 in my Skipton BS LISA at 1%.

Was wondering if I'd be better off depositing it into a 1 year fixed rate in February, like Ford Money 2%, and get the interest on it, or if it's better to just deposit £4k in April so it's done and dusted? Not sure which option would earn some more interest over the following 12-14 months or so. Just trying to maximise interest opportunity.

eskbanker

aj23 wrote: »

Wondering whether to make a LISA deposit in April or hold off until March next year.

Currently have £4000 set aside ready to deposit from my Leeds BS Issue 4 for the next tax year, and £15000 in my Skipton BS LISA at 1%.

Was wondering if I'd be better off depositing it into a 1 year fixed rate in February, like Ford Money 2%, and get the interest on it, or if it's better to just deposit £4k in April so it's done and dusted? Not sure which option would earn some more interested over the following 12-14 months or so. Just trying to maximise interest opportunity.

It's not strictly a like-for-like comparison when there's just over two months from now until the new tax year plus there's a delay in LISA bonuses being applied, but over the period you're effectively weighing up earning 1% on £5K in the LISA versus 2% on £4K with Ford, so the latter is £30 better from an interest perspective.