Lifetime ISAs guide

Mr_Dangermouse

I inherited £1,200 just over a year ago and used it to open a skipton LISA, received the £300 bonus on it but haven't saved a penny since (I just turned 24)

I'm now in a position where thanks to a pay rise, as of the forthcoming financial year, I should be able to save the maximum £4k per year.

The kicker is that I want to buy in London and am having to save from basically scratch in order to do so. I'm fully aware that it'll take a number of years to be able to afford to save up.

Would it be legitimate to transfer over to AJ Bell Youinvest to try and get a better return here, or should S&S LISA's only be used for retirement savings? I have basically no knowledge of investment so I'd need to just choose their default investment strategy.

masonic

Mr_Dangermouse wrote: »

I inherited £1,200 just over a year ago and used it to open a skipton LISA, received the £300 bonus on it but haven't saved a penny since (I just turned 24)

I'm now in a position where thanks to a pay rise, as of the forthcoming financial year, I should be able to save the maximum £4k per year.

The kicker is that I want to buy in London and am having to save from basically scratch in order to do so. I'm fully aware that it'll take a number of years to be able to afford to save up.

Would it be legitimate to transfer over to AJ Bell Youinvest to try and get a better return here, or should S&S LISA's only be used for retirement savings? I have basically no knowledge of investment so I'd need to just choose their default investment strategy.

If you are taking a 10 year view and are comfortable delaying your house purchase for a few years if necessary then a S&S LISA could be used and the investments shifted from higher risk to lower risk over those 10 years (by diverting an increasing proportion of new contributions into a low risk fund). If you are lucky, you could enjoy better than average growth and be in a position to buy sooner, and you'd be quite unlikely to do worse than cash if you started with a 60:40 equities/bonds multi-asset fund like Vanguard Lifestrategy. Perhaps a fund including property exposure, such as L&G Multi Index would be more suitable to your aim.

System

Is anyone able to give an indication on the typical time it takes to receive bonuses from now with Skipton?

(For instance, a deposit made on the 1st of Feb)

...what are folks' experience?

Thanks in advance


EDIT: from what I've seen on the Skipton site, a subscription date of Feb 1st would mean January is 'Month 1' and Feb is 'Month 2'

(since month 1 effectively "starts on the 6th" and the 1st of Feb wouldn't sit in this window... Therefore it sits in month 2...)

Thus, the bonus on my subscription should be "paid into my account within 14 days of the 20th of month 2" ie. within 14 days of the 20th of Feb ... Haven't received anything yet so should I expect to see this by Wednesday?

Just trying to work out when would be the best time to plump my next subscription in from today in-order to maximise interest on it really (and to clarify others' experiences are inline with this...)

masonic

NevvyC wrote: »

Just trying to work out when would be the best time to plump my next subscription in from today in-order to maximise interest on it really (and to clarify others' experiences are inline with this...)

The best time, assuming you can get a better rate outside the LISA and want to maximise interest, would be as close to the 5th of April as possible.

System

masonic wrote: »

The best time, assuming you can get a better rate outside the LISA and want to maximise interest, would be as close to the 5th of April as possible.

Quite, I wouldn't want to leave it too late incase of any issues with the final subscription for the year just for a (few?) extra quid elsewhere however...

Getting 3% elsewhere on the sum (which obviously beats the Skipton 1%...) but then if I lump it into my LISA before the 5th(?*) it seems this would be inline with "month 2" meaning I would see my 'hefty' bonus within 14days of the 20th of the same month (instead of having to wait an additional month to see it... And thus, be earning 1% on that stake of bonus also in that timeframe...)


*working from memory :rotfl: !


EDIT: perhaps I should have clarified, I meant "maximising the interest" in terms of on the 25% bonus amount received sooner rather than later with an ASAP/earlier final subscription for the year...

masonic

NevvyC wrote: »

EDIT: perhaps I should have clarified, I meant "maximising the interest" in terms of on the 25% bonus amount received sooner rather than later with an ASAP/earlier final subscription for the year...

Let's compare two scenarios:

1) You pay in £4k on 5th March - the last date to qualify for the April bonus payment - and therefore receive your bonus on the 27th April March.

2) You pay in £4k on 3rd April - to be safe of not missing the end of the tax year - and therefore receive your bonus on the 27th May April.

In scenario 2 you will gain interest at 3% on £4k for 29 30 days, which is £9.53 £9.86
But you will lose interest at 1% on £1k for 30 days, which is £0.82

So overall you will be £8.71 £9.04 better off delaying by a month.

Edit: In fact, just three extra days interest at 3% on the amount paid into the LISA is enough to offset a one month delay in receiving the bonus on the amount paid in.

MisterMotivated

Does anyone know when the monthly cutoff/bonus payment dates are with AJ Bell?

sully1311

masonic wrote: »

Let's compare two scenarios:

1) You pay in £4k on 5th March - the last date to qualify for the April bonus payment - and therefore receive your bonus on the 27th April.

2) You pay in £4k on 3rd April - to be safe of not missing the end of the tax year - and therefore receive your bonus on the 27th May.

In scenario 2 you will gain interest at 3% on £4k for 29 days, which is £9.53
But you will lose interest at 1% on £1k for 30 days, which is £0.82

So overall you will be £8.71 better off delaying by a month.

Edit: In fact, just three extra days interest at 3% on the amount paid into the LISA is enough to offset a one month delay in receiving the bonus on the amount paid in.

Wouldn’t you get your bonus in April not May as the month’s run from the 6th to the 5th?

masonic

sully1311 wrote: »

Wouldn’t you get your bonus in April not May as the month’s run from the 6th to the 5th?

Yes, I misunderstood the description above. It makes no difference to the maths give or take a day's interest. Substitute 27th March for 27th April and 27th April for 27th May.

masonic

MisterMotivated wrote: »

Does anyone know when the monthly cutoff/bonus payment dates are with AJ Bell?

I don't know when the cut-off is, but my initial bonus was received on 2nd May 2018 and my bonus from a subscription made on 7th April was received on 29th May. Not much data, but suggestive that the months are also aligned with the tax year.

Of course a S&S LISA is a very different kettle of fish, because on average investments will perform better than cash so subscriptions should be made as early as possible in the tax year, but one also has to consider dealing charges. I'll be aiming to put in £4k before the regular investment date of 10th April. I'll receive the bonus during late May and invest it (again using the regular investment option) on 10th June.