Cash LISA

stuckinazoo

My situation is I'm urgently looking to open a LISA but at this stage with little time to research, I'm opting for the zero risk, no fee Skipton cash ISA (I may transfer to an investment LISA in the future). This would be my retirement nest egg.

I already have around £6K in a help to buy ISA and understand I'm too late to transfer, and I may be ready to buy my first property in the next year anyway. So that can stay where it is.

So am I correct that I can pay into both help to buy and cash LISA over the next year. I know holding both isn't a problem but the fact this particular LISA is cash confuses things.

Brynsam

stuckinazoo wrote: »

I already have around £6K in a help to buy ISA and understand I'm too late to transfer, and I may be ready to buy my first property in the next year anyway. So that can stay where it is.

Are you sure you're too late? See https://www.telegraph.co.uk/personal-banking/savings/use-isa-loophole-now-1100-savings-boost/

stuckinazoo

Hmmm I thought I saw an article dated a few weeks ago saying we had just days left. I understood that there's still time to open a LISA but if transferring an existing help to buy, that should have been done by now. Is that wrong?

Even if I can transfer, I'm unsure what happens to the 2K left in the help to buy. Does is just accumulate usual interest and not earn a bonus?

Alexland

You are fine to contribute to both a HTB ISA (which is a type of Cash ISA) and a LISA (which is not a type of Cash ISA even though it can hold cash) during the same tax year but only one can be used for a qualifying property purchase.

It is not too late to open and contribute to a LISA and you would not need to worry about transfer deadlines if you were using the HTB ISA for the property purchase and the LISA for retirement.

Before using a LISA for retirement first consider if making additional employee contributions into a workplace pension would be more effective. In particular if you can get higher employer matched contributions or avoid/reduce 40% tax. Also consider if there is any possibility that you would need this money to support the property purchase.

If using a LISA for retirement then S&S would be the most appropriate as the low cash interest rate would mean your spending power would be erroded by inflation. HL are good for regular fund investments and AJ Bell are good for occasionally large lump sum investments (as they have a cost per trade). Nutmeg are also good and simple but they are in a difficult financial position.

I wouldn't bother opening with Skipton then transferring to a S&S LISA provider but it would work. Its easier just to pick the right S&S LISA provider now. With HL and AJ Bell you can contribute cash now and choose your investment later.

Alex

stuckinazoo

Thanks, how much cash can HL and AJ Bell hold without investing and is there even an interest rate on that? Also if I have to open with Skipton and later transfer, is there a fee or penalty?

Alexland

stuckinazoo wrote: »

Thanks, how much cash can HL and AJ Bell hold without investing and is there even an interest rate on that? Also if I have to open with Skipton and later transfer, is there a fee or penalty?

You can contribute and hold the full £4k in cash with HL and AJ Bell without investing but the interest, if any - check their websites, will be marginal and if you are using the LISA for retirement you would be best making your investment decision relatively soon and giving the money the chance to beat inflation.

If you really want to open your account with Skipton and ask HL or AJ Bell to transfer it later there will be no exit fee with Skipton and I am sure HL and AJ Bell would be pleased to gain a new customer. It's still a waste of time.

Alex.

In_For_A_Penny_2

Alexland wrote: »

If you really want to open your account with Skipton and ask HL or AJ Bell to transfer it later there will be no exit fee with Skipton and I am sure HL and AJ Bell would be pleased to gain a new customer. It's still a waste of time.

Alex.

It might not be a total waste of time. It is still unclear what other platforms might offer LISA in the near future. If they do, they will almost certainly be cheaper than HL and likely to be cheaper than AJ Bell for those making regular purchases/payments. Opening a cash LISA with Skipton to avail of this year's allowance and then considering long-term strategy might not be a bad idea.

stuckinazoo

I've opened with AJ Bell. I would have chosen Skipton if I was transferring my Help To Buy but I'm potentially looking at buying in the next 12 months so a bit risky moving at this stage. Now it gets tricky. I had my eye on a good looking fund but the management fees are something like 1.3% on top of the 0.25. Really not sure if worth it so might invest the full lot in Passive Funds.