Lifetime ISAs guide

j_wood93

Hi Guys,

First time posting on here but I have read the forums a lot before. It seems the general consensus is that people want the Cash LISA over the S&S ISA.

For me dabbling in SS is all about your attitude to risk and personally, i think i should be done with money you dont mind losing, although the likely hood of this is very slim when dealing with the set portfolios offered by Nutmeg and The Share centre there is still risk of losing the lot, something i dont want to do when dealing with my mortgage funds.

Therefore ive looked at the S&S LISAs with the intention of moving them into a cash LISA when they trickle out later in the year. (but i want to get the countdown clock started now)

This is what I've found through looking at the 3 options for S&S LISAs.

For me HL is a straight no - i dont want to invest my mortgage funds in S&S and it makes no sense to pay the transfer out fee when i finaly move it to a cash LISA.

The share fund was looking like a favourite, however! You can hold your cash (in theory £4000) as cash in this LISA and your money will gain interest at the BOS base rate (currently 0.25%) however (from what i have read) they take a 3.5% cut of your fund to cover funds left in cash (obviously they want you to invest in one of their 3 funds). Some food for thought. In theory you could do this with just £1 and then move the money later and top up the additional but they would still charge the £25 trf out fee!

Nutmeg - this is the best option in my opinion(in theroy). They offer £0 transfer out fee and a minmum invesment of £100. My thinking is to deposit £100 and put it straight in to their most cautious fund which gains about 1.4% pa (with charges at 0.75% + 0.19%) so your money will likely not change much. When a cash LISA opens i will transfer from Nutmeg to the cash LISA and top up to the full £4000, and then the government will top up the additonal £1000.

Once the money is in the cash LISA it will be FSCS protected (something i feel is needed when dealing with precious mortgage funds)


Hope this helps and this is what i intend to do with my money. If people ind better options let me know.

Please note im only 24 and although work in finance this is in no way financial advise of any kind it is just my opinion.
:money:

WillPS

jackknight wrote: »

I've been all set to open a LISA for months and now the new tax year is here and there's naff all available. The stocks and shares things have always unnerved me because I don't like gambling and I don't feel comfortable putting my savings into something that's not a savings account, it's a glorified casino.

The banks are all sitting there saying they don't want to launch a LISA until they can see how they work and how the public respond to them. Catch 22 here is that if there aren't any available for people to open, how on earth can they observe the results?

Skipton are opening one, and no doubt other smaller players will give it a try too.

Until then, you can either 'gamble' £100 with Nutmeg, or wait it out. Whether that gamble is worth it to you rather depends on there being a chance you might want to buy in May or June 2018, and whether you'll have an extra £1600 to add to the pot for that purchase in March.

As I view it, even if the value of my £100 investment has fallen to £0.01 by June (which is extremely unlikely) I will be able to take advantage of an additional £400 of government bonus in April 2018 - so the cost of £99.99 would still represent good value.

Lungboy

j_wood93 wrote: »

Hi Guys,

First time posting on here but I have read the forums a lot before. It seems the general consensus is that people want the Cash LISA over the S&S ISA.

For me dabbling in SS is all about your attitude to risk and personally, i think i should be done with money you dont mind loosing, although the likely hood of this is very slim when dealing with the set portfolios offered by Nutmeg and The Share centre there is still risk of losing the lot, something i dont want to do when dealing with my mortgage funds.

Therefore ive looked at the S&S LISAs with the intention of moving them into a cash LISA when they trickle out later in the year. (but i want to get the countdown clock started now)

This is what I've found through looking at the 3 options for S&S LISAs.

For me HL is a straight no - i dont want to invest my mortgage funds in S&S and it makes no sense to pay the transfer out fee when i finaly move it to a cash LISA.

The share fund was looking like a favourite, however! You can hold your cash (in theory £4000) as cash in this LISA and your money will gain interest at the BOS base rate (currently 0.25%) however (from what i have read) they take a 3.5% cut of your fund to cover funds left in cash (obviously they want you to invest in one of their 3 funds). Some food for thought. In theory you could do this with just £1 and then move the money later and top up the additional but they would still charge the £25 trf out fee!

Nutmeg - this is the best option in my opinion(in theroy). They offer £0 transfer out fee and a minmum invesment of £100. My thinking is to deposit £100 and put it straight in to their most cautious fund which gains about 1.4% pa (with charges at 0.75% + 0.19%) so your money will likely not change much. When a cash LISA opens i will transfer from Nutmeg to the cash LISA and top up to the full £4000, and then the government will top up the additonal £1000.

Once the money is in the cash LISA it will be FSCS protected (something i feel is needed when dealing with precious mortgage funds)


Hope this helps and this is what i intend to do with my money. If people ind better options let me know.

Please note im only 24 and although work in finance this is in no way financial advise of any kind it is just my opinion.
:money:

Why the rush to get the money into a LISA? The government bonus isn't paid on it until next April, so it doesn't seem to make any sense to open an S&S LISA now, with all the risk that entails, just to switch it to a cash LISA in a few months. Aren't you better keeping the money in a high interest current account and then opening the cash LISA with it later?

ben_harding10

Ads1 wrote: »

I am trying to work out of the LISA would be any good for me.
I work for a large company who has a defined benefit pension (final salary). I have been paying in to since I was 18. I will be 37 when the LISA in introduced.
I already have bought my first home. So would only be able to draw on the LISA when I am 60.

Would it be worth investing in a LISA? and can you have an ISA as well as a LISA? At the moment I have savings in an ISA for maybe one day moving to a bigger property.

Hopefully someone will have the answers.
Cheers
Adam

I would say your company pension is more valuable than what the LISA offers, as they are matching what you put in. The only time it would be best to put money into a LISA instead is if you maxxed out your pension pot (£1,000,000).

That being said, if you are looking to park your money away completely tax free, have instant access to it at 60 (5 years after the pension but I don't think you have to seek financial advice to get hold of it in a lumped sum), if you are patient, then any additional money you have could go into it. Given you are 37 you won't be able to make the most of it, and there is no access to it before 60 (if you want to buy a house), i'd say stick to maximising the company pension and retain additional cash in a normal ISA. You could alternatively try your hand in stocks and shares ISA (Fidelity etc.) and look at SIPPs.

To answer your other question, yes you can have a LISA and an ISA. They count towards the same allowance (but you can only have a single LISA). The maximum £4000 that you put into a LISA counts towards your total ISA allowance for that tax year (2017/18 is £20,000 so putting the full sum leaves you with £16,000). This isn't much hassle as the allowance has risen this tax year from the original allowance of just over £15,000.

bowlhead99

Lungboy wrote: »

Why the rush to get the money into a LISA? The government bonus isn't paid on it until next April, so it doesn't seem to make any sense to open an S&S LISA now, with all the risk that entails, just to switch it to a cash LISA in a few months. Aren't you better keeping the money in a high interest current account and then opening the cash LISA with it later?

Agreed. The only reason to want to open a LISA this month with so little choice available in the market is if you have a legitimate expectation of being in a position to complete a property purchase at end of April / beginning of May 2018 using the bonus funds it will provide at that point. The LISA account needs to have been open 12 months (including predecessor LISA accounts transferred in) to be allowed to withdraw the funds for a qualifying property purchase without penalty.

If you're not buying until after that point there's no hurry to jump on the bandwagon in the next three-or-so weeks to be able to say you've hit your 12 months by then.

Yurona

Or if you are hitting 40 in the next weeks - also a good reason to open one now!

j_wood93

Lungboy wrote: »

Why the rush to get the money into a LISA? The government bonus isn't paid on it until next April, so it doesn't seem to make any sense to open an S&S LISA now, with all the risk that entails, just to switch it to a cash LISA in a few months. Aren't you better keeping the money in a high interest current account and then opening the cash LISA with it later?

bowlhead99 wrote: »

Agreed. The only reason to want to open a LISA this month with so little choice available in the market is if you have a legitimate expectation of being in a position to complete a property purchase at end of April / beginning of May 2018 using the bonus funds it will provide at that point. The LISA account needs to have been open 12 months (including predecessor LISA accounts transferred in) to be allowed to withdraw the funds for a qualifying property purchase without penalty.

If you're not buying until after that point there's no hurry to jump on the bandwagon in the next three-or-so weeks to be able to say you've hit your 12 months by then.

I would agree with both points, but if someone is looking to buy within the next year or so, then I believe this is the best option on the table at the minute. By all means if people have no plan to buy a house for the next few years then wait to see what becomes available later on in the year. Although i doubt any cash LISA will offer interest rates higher than 1% or so.

gaz77

I haven't been through all of the pages in this thread, so apologies if my questions have already been answered before.

I turn 40 in a few months, and already own my house. I don't see a LISA as an alternative to a pension.

I have been thinking about some medium to long-term saving. Ideally, this would give me money to live off if I retire before state pension age at 67. The more money in the pot, the earlier I can afford to retire. After 67, state and company pension would kick in.
I also need funds that could be accessed in an emergency.

A S&S LISA seems ideal for this.

My first question is on the exit penalty:

---

The example calculation assumes no interest. So £100 invested, gets increased to £125 with the bonus, but I only get £93.75 if I withdraw before I'm 60 due to a £31.25 penalty.

In reality, I would be putting into funds with reasonable growth expectation. At some point, that £125 may now be worth £250 and an emergency comes up where I need to withdraw some or all of it.
Is it the same £31.25 penalty as above - meaning I get back £218.75?
Or is the 25% penalty on the new value, meaning £62.50 penalty and I only get back £187.50?
Putting this another way, if I've 100% growth, do I get back 75% of the growth or 50%?
Also, if my investment depreciates, how do these calculations work?

Also, I presume there's no point investing in income funds. Any income from funds would need to be reinvested or get penalised too?

My second question, is to confirm the provider charges:

---

As I'm investing for the long-term, I'll discount exit charges.

Hargreaves Lansdown: 0.45% account charges + (1.36% to 1.46%) OCF for their Ready Made ISAs. So I'm looking at 1.81% to 1.91% total fees?

Nutmeg: 0.75% for their managed portfolio + about 0.19% manager charges. So I'm looking at 0.94% total fees?

Share Centre: 2% to 2.21%. Are there any other fees?

I realise you can't predict which funds will perform better, but on the face of it, Nutmeg fees are about half the others. Given I don't want to pick investments myself, are Nutmeg the obvious choice?

peter_333

Interesting note on Nutmeg... When signing up, they point out that the initial investment you make will be the only investment you can make for a while. They say:

"You'll be limited to this single payment at the start of our Lifetime ISA launch but we're adding the ability to make further payments soon."

Via their text chat they say that the ability to add to the ISA will be available within a few months, but in the interim you will not be able to increase your investment in the ISA beyond what you put in when opening.

SoozyJ22

Thanks for pointing that out Peter. I need to open a LISA soon as my 40th is rapidly approaching and have decided on Nutmeg for a number of reasons. The next step was decide how to fund it. I'd prefer to drip feed to counter any fluctuations in the market and was thinking of £700 up front and £300 a month thereafter, but it looks like that won't be possible which is very frustrating.