LISA choices

Grenage

Hi guys,


I've been putting money into a S&S ISA for a few years; nothing massive but it's now at a level where I wouldn't have to panic for a while if I lost my job, or the roof needed replacing.


I'm 38 and am considering switching my contributions to a LISA for longer-term savings. I could salary sacrifice further with my work pention, but I'm at the max where they'll contribute the same (5%). The 25% bonus is quite attractice.


AJ Bell YouInvest seems like a good option with a lot of funds available, and low fees. Does anyone have any other suggestions for providers?

Ggazw

Hi!

I recently started contributing into a LISA with H&L Hargreaves Lansdown; I am investing in funds (no dealing charge), their website gives you some suggestions of what funds to consider, worth a read through. I have invested in some companies too, there is an £11 dealing charge for investing in organisations, although risky its worth researching into this avenue of investing.

The bonus is pretty useful, I am maxing out the £4,000 allowance which gives me an additional £1,000 bonus. Once I have hit the £4k limit, I will then put further funds into a Stocks and Shares ISA (Virgin).

Good luck!

Grenage

Cheers, I'll check them out! They were one of a few that seemed popular.

Alexland

S&S ISAs don't make good emergency pots as you wouldn't want to sell down during a crash. Cash accounts are more suitable for covering an employment gap or fixing the leaking roof.

For a basic rate taxpayer making additional salary sacrifice pension contributions works out about the same as the LISA bonus. For a higher rate taxpayer then pension contributions are more beneficial.

HL's fee structure is better for small or regular contributions into discounted funds and AJ Bell is better for occasional lump sums or large account valuations. After 3 tax years of full contributions plus growth we are transferring our LISAs from HL to AJ Bell for lower capped fees on holding an ETF.

Alex

poppy10_2

Grenage wrote: »

I could salary sacrifice further with my work pention, but I'm at the max where they'll contribute the same (5%). The 25% bonus is quite attractice.

Saving into a pension is generally better value than an ISA. With the pension you'll get the 20% tax back, potentially up to 40% if you are a higher rate taxpayer.

If the 25% LISA bonus is tempting you, you could get it by transferring £4k form your existing S&S ISAs into a LISA, rather than putting new money into a LISA

aroominyork

Alexland wrote: »

S&S ISAs don't make good emergency pots as you wouldn't want to sell down during a crash. Cash accounts are more suitable for covering an employment gap or fixing the leaking roof.

For a basic rate taxpayer making additional salary sacrifice pension contributions works out about the same as the LISA bonus. For a higher rate taxpayer then pension contributions are more beneficial.

HL's fee structure is better for small or regular contributions into discounted funds and AJ Bell is better for occasional lump sums or large account valuations. After 3 tax years of full contributions plus growth we are transferring our LISAs from HL to AJ Bell for lower capped fees on holding an ETF.

Alex

Alex's first point is key. Investing in S&S is for investments you will not need for at least five years, not for emergency/rainy day funds. But given your age, bear in mind that although you can contribute to a LISA up to 50 years of age you must open it before you turn 40. So even if you move your S&S ISA into cash you might want to open a LISA with a nominal amount so you have the option to invest in it during your 40s.

There are not many LISA providers. HL and AJ Bell are the two biggest, and my son is now moving his LISA from HL to AJ Bell because the annual fees are lower, 0.25% instead of 0.45%.

Alexland

aroominyork wrote: »

There are not many LISA providers. HL and Interactive Investor are the two biggest, and my son is now moving his LISA from HL to ii because the annual fees are lower, 0.25% instead of 0.45%.

Is that a typo or a braino? Surely AJB not II?

Grenage

Thanks guys, I guess factoring in the salary sacrifice tax reduction it would work out quite close. I'll open one regardless just to keep the option open.

Regarding not placing an emergency fund in S&S, I know that it's generally frowned upon. I took a risk knowing that in a really bad situation I could borrow from a relative in the short term

Now that's it's been in there six years, even if the market dropped 50% I'd still have more than I originally invested. I might use a TSB account for a small amount of emergency money and leave the rest in the ISA.

aroominyork

Grenage wrote: »

Thanks guys, I guess factoring in the salary sacrifice tax reduction it would work out quite close. I'll open one regardless just to keep the option open.

Regarding not placing an emergency fund in S&S, I know that it's generally frowned upon. I took a risk knowing that in a really bad situation I could borrow from a relative in the short term

Now that's it's been in there six years, even if the market dropped 50% I'd still have more than I originally invested. I might use a TSB account for a small amount of emergency money and leave the rest in the ISA.

I’m concerned you could make an awful mistake. Are you really content to risk losing 50% of your investments because you’d still be ahead compared to six years ago?

People on this forum sometime ask what to do with funds which have fallen, eg “I had £20,000 but picked bad shares/funds and now only have £12,000. Should I wait for them to go back up?” To which the answer is that their original £20,000 is irrelevant; all that matters is the best way to invest £12,000 as if they were starting out now. Likewise, you should not risk your future wealth by looking backwards at gains already made.

If you really cannot take your foot off the S&S gas then think about a cautious fund with a goodly chunk of bonds, something life Vanguard LifeStrategy 20 or LifeStrategy 40.

cloud_dog

Alexland wrote: »

For a basic rate taxpayer making additional salary sacrifice pension contributions works out about the same as the LISA bonus. For a higher rate taxpayer then pension contributions are more beneficial.

Ummm, just to be clear (as the OP hasn't explicitly stated this):

1. Is the OP paid via 'Salary Sacrifice' (sometimes call salary exchange)?
2. Is the OP a BRT or HRT payer?

IF the monies really are for longer-term investing, i.e. retirement / near-term retirement AND the OP is paid via salary sacrifice then using the company pension (via SS) wins hands down in comparison to a LISA, due to the additional 12% NI savings on contributions for a BRT payer.

IF the OP is a BRT payer and there is no SS involved then a LISA is a better option for additional contributions than a pension (assuming the OP ok with withdrawal at 60 rather than currently 55 for a DC pension).

IF the OP is a HRT payer then pension wins.

IF the OP is paid via SS and the company pass some / all of their NI savings on to the OP then this is a excessively good for the pension option.

Grenage

aroominyork wrote: »

I’m concerned you could make an awful mistake. Are you really content to risk losing 50% of your investments because you’d still be ahead compared to six years ago?

But if my emergency fund was in a bank account or such, it would barely have grown - it would possibly be worth less due to inflation. At least in the S&S ISA it's making great growth, and if I don't face a personal calamity, I'll be much better off in the long run.


Am I willing to lose 50% of my investments if a market crash coincides with poor circumstances - yes, because I wouldn't have have had investment in the first place if I'd left it in a bank account.

cloud_dog wrote: »

Ummm, just to be clear (as the OP hasn't explicitly stated this):

1. Is the OP paid via 'Salary Sacrifice' (sometimes call salary exchange)?
2. Is the OP a BRT or HRT payer?

IF the monies really are for longer-term investing, i.e. retirement / near-term retirement AND the OP is paid via salary sacrifice then using the company pension (via SS) wins hands down in comparison to a LISA, due to the additional 12% NI savings on contributions for a BRT payer.

IF the OP is a BRT payer and there is no SS involved then a LISA is a better option for additional contributions than a pension (assuming the OP ok with withdrawal at 60 rather than currently 55 for a DC pension).

IF the OP is a HRT payer then pension wins.

IF the OP is paid via SS and the company pass some / all of their NI savings on to the OP then this is a excessively good for the pension option.

Sorry, yes - we have a salary sacrifice S&S system with Aviva. I am a BRT payer. I was not aware of the 12% NI saving on contributions!