LISA S&S while still under 40?

girllikeme1

I hope to get some advice on here if anyone can help please? I turn 40 next year so am considering opening LISA S&S while I still can.

Very little to invest right now - but hoping in my 40s I might be able to save more as the kids grow up (I am working part time at the moment and paying nursery fees).

I am thinking an initial investment of £1000 and then topping up with regular payments when able.

I am a homeowner so understand I will not be able to access the money until aged 60, without incurring charges.

Is it worth doing this or would I be better off with an Stocks & Shares ISA?

I do have private pensions not a huge amount (£30K ish combined I think) and currently in the Local Government Pension Scheme.

Thanks in advance for your help.

eskbanker

girllikeme1 wrote: »

Is it worth doing this or would I be better off with an Stocks & Shares ISA?

You can do both if you have enough money - you can only pay £4K per tax year into a S&S LISA but the fact that you get a 25% bonus makes it a compelling proposition if you're happy not to have (penalty-free) access until 60.

Alexland

If you suspect the LISA may be useful for contributions up to age 50 to withdraw at 60 then I would open an account before your 40th to keep your options open. Whether a LISA would beat a pension really depends on your circumstances and future tax policy.

The Cash LISA would not be suitable for 10-20 years as the interest rate is below inflation so the spending power of your money would reduce over time so look at S&S investments which have historically delivered long term growth - with some ups and downs along the way.

Alex.

kidmugsy

Opening a LISA now for the smallest convenient amount seems an excellent gamble to me. Even if you never add another penny at least you will have kept your options open.

I don't know which provider you'd be best to use. We are fans of Hargreaves Lansdown for small SIPPs but they seem pricey to me for ISAs.

kidmugsy

I've looked at this 'Which?' list.
https://www.which.co.uk/money/savings-and-isas/isas/lifetime-isas-ac6mf6s7r9d5

If I were young enough I'd weigh up:

(1) Skipton, with a view to holding cash and later transferring to an S&S provider when I had a bit more accumulated.
(2) A J Bell, as being like Hargreaves Lansdown but cheaper.
(3) Foresters Friendly, as providing various benefits as befits a mutual society, and for solving the "what shall I invest in?" problem.

I may be biased: we've had policies with (3) and have been very pleased. But then again we've been pleased with the service from (1) and HL too. We've never used AJB but we are considering them.

Alexland

kidmugsy wrote: »

(1) Skipton, with a view to holding cash and later transferring to an S&S provider when I had a bit more accumulated.

If the OP is going to start by investing £1,000 they might as well go direct to a S&S LISA provider and the ability to transfer to another good LISA provider going forward is not assured as we have seen with HL not accepting new LISA transfer requests recently.

kidmugsy wrote: »

(2) A J Bell, as being like Hargreaves Lansdown but cheaper.

It really does depend on the circumstances as although the headline % platform fee is lower with AJ Bell there are no fund trade costs and better discounted OCF funds on HL. If the OP is looking to make low value regular trades into funds they may be better with HL.

kidmugsy wrote: »

(3) Foresters Friendly, as providing various benefits as befits a mutual society, and for solving the "what shall I invest in?" problem.

What kind of return did they give you compared to say investing in a low cost 80% equities mixed asset fund over the same period?

Alex

cjv

I opened my LISA last year with Nutmeg and I was very happy with the service, website and performance. I had to transfer it to a Cash LISA as I am planning on getting a Mortgage soon but if I was going to keep it in S&S for longer I would of stayed with Nutmeg while my pot was building up.

With no experience of investments I found Nutmeg to be a very simple route for me to get started, with plans to look at other providers after a year or two.

kidmugsy

Alexland wrote: »

If the OP is going to start by investing £1,000 ...

True. But at Skipton she could start with £1. Then just before the end of the tax year she could decide how much more she felt she could afford to add. I do like flexibility; the tighter her budget is the more important it is (I suspect) to keep some flexibility.

girllikeme1

Thanks for all this advice!

Am I correct in thinking there is no benefit to transferring money to the LISA now (due to low % interest) - I could keep it in higher savings or Reg Saver until March/April 2019 then transfer it to a LISA?

Alexland

girllikeme1 wrote: »

Am I correct in thinking there is no benefit to transferring money to the LISA now (due to low % interest) - I could keep it in higher savings or Reg Saver until March/April 2019 then transfer it to a LISA?

Depends if you decided to go for the Cash or S&S product.

If cash then yes the Skipton rate is way below inflation so you might as well contribute towards the end of the tax year (but leave enough time for any unexpected issued to be resolved).

If S&S the sooner you invest the money the sooner it (and the bonus) will start growing. Yes you might get unlucky and buy in at a bad time but that's just as likely now as later and historically the general market direction is upwards.

Alex.