Two ISA Questions

Guru86

Morning

I have a couple of questions about ISAs but roughly around same topic and hoping someone can help.

(1) The new LISA - we are thinking of opening one of these for the wife to boost her pension. At first we will only pay a little amount maybe £50 a month until pay rises come and we can boost it. I know there are no details on cash ISA yet so looking at a S&S one. We have no idea on stocks so would take one of those managed portfolios. Are these a decent option for a small amount?

(2) Classic ISA - I want a savings account for a year or so. Currently savings in TSB and nationwide account. Is a S&S ISA good for a year savings or should be used for longer savings like a LISA?

Thanks in advance

masonic

Guru86 wrote: »

(1) The new LISA - we are thinking of opening one of these for the wife to boost her pension. At first we will only pay a little amount maybe £50 a month until pay rises come and we can boost it. I know there are no details on cash ISA yet so looking at a S&S one. We have no idea on stocks so would take one of those managed portfolios. Are these a decent option for a small amount?

It depends what you mean by "one of those managed portfolios". Some of those options are good, some bad. You should keep one eye on charges, since this is the part of performance that you can know in advance and control.

(2) Classic ISA - I want a savings account for a year or so. Currently savings in TSB and nationwide account. Is a S&S ISA good for a year savings or should be used for longer savings like a LISA?

Thanks in advance

S&S should not be used for money you need in a year. Five to ten years is needed to reduce the risk of short term losses. Stick to Nationwide and TSB, or add a First Direct/HSBC/M&S regular saver if you can lock away for a full 12 months.

bowlhead99

Guru86 wrote: »

(1) The new LISA - we are thinking of opening one of these for the wife to boost her pension.

You could also consider putting money into a pension to boost her pension

At first we will only pay a little amount maybe £50 a month until pay rises come and we can boost it. I know there are no details on cash ISA yet so looking at a S&S one.

Even if there were details on cash LISA, you should ignore them because a cash deposit is unsuitable for retirement in over two decades time ; it will get eaten away be inflation. S&S investment funds are the only sensible way.

We have no idea on stocks so would take one of those managed portfolios. Are these a decent option for a small amount?

Yes, you should not try to pick individual stocks and shares , but should buy an investment fund where the investment manager allocates your money into shares and bonds and other things all over the world. And with a small amount, it is your only real choice because you can't build up your own portfolio of individual choices when you only have about £50 of new money each month to play with.

However, you mention a 'managed portfolio'. These can sometimes be quite expensive if it is a situation where you are paying a manger to make choices and hold a selection of other funds for you within the portfolio which all have their own investment managers charging money to decide on the underlying holdings, and on top you have to pay a fee for 'investment platform' services to hold the funds and administer your account. The costs can spiral.

If you are using a solution which has a cost of under 1% a year including all the investment platform charges and fund operating costs, you are doing it right. More than that would be expensive, even if a percent a year in charges doesn't sound like much on a few hundred pounds average balance. It all adds up over a 20+ year investing timeline.

(2) Classic ISA - I want a savings account for a year or so. Currently savings in TSB and nationwide account. Is a S&S ISA good for a year savings or should be used for longer savings like a LISA?

An S&S ISA holds investment assets which are subject to investment risk. Their values can go down as well as up, so although in the long term they should make much better returns than cash, in the short term they could do anything, depending on your choices and the whim of the market.

So, if you are going to need the money in a year's time, S&S ISA would be unsuitable because you might get back less than you have today, and it might be significantly less if you make poor choices. You are better shopping around between savings accounts only, especially high interest current accounts and 'regular saver' accounts.

If you are putting money away for six or seven years at least - ideally ten to fifteen years plus - then you have more chance that the S&S investment funds make returns which are more in line with their long term averages. You need to be able to wait to get through a whole economic cycle of downs and ups, rather than invest now, watch it fall 25%, and then take your remaining money back next year with no more time spare for recovery.

Guru86

That's great thanks for advice. Her employees pension isn't that great and not very helpful so looking for something to complement it.

Sorry to be a pain what should I look for on a site for the above option of buying a investment fund? As by sounds of it I have my terminology wrong for managed account.

What are current recommendations for companies that would do it for me? Or point me direction of the info?

badger09

Guru86 wrote: »

That's great thanks for advice. Her employees pension isn't that great and not very helpful so looking for something to complement it.

Sorry to be a pain what should I look for on a site for the above option of buying a investment fund? As by sounds of it I have my terminology wrong for managed account.

What are current recommendations for companies that would do it for me? Or point me direction of the info?

What do you mean, 'her employees pension isn't that great'?


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