S&S LISA? Novice question.

girllikeme1

I'm turning 40 in 6 months' time and already have a Cash LISA but am thinking of opening a S&S LISA as well. I'm not savvy with stocks and shares though!

My question is could I open one with the minimum amount so I have the option to invest over the next 10 years, or would I just be hit by a load of fees?

I am already contributing to my workplace pension with additional salary sacrifice contributions (local govt) but want to spread investments.

Alistair31

You could, yes. It would be sensible to keep your options open.

You would have to weigh up the benefit (or otherwise) of contributing more to your workplace pension over self-selected investments within a S&S LISA.

Afraid_of_Kittens

I am in the same position. I have 3 local government pensions - 2 I get at 60 with a nice lump sum.

I have a growing NEST pension.

I prefer a Stock and Shares ISA rather thn a LISA

I have a Legal and General Stock and Share ISA these are my funds and returns so far this year:-

20% UK Index Trust (FTSE all share) - 13.9% ytd
20% All stocks Gilt Index (UK Government Bonds) - 11% ytd
20% International Index Trust (International shares ex UK) - 22% ytd
10% Global Emerging Markets Index Trust - 11.9% ytd
10% Global Tech Index Trust - 32% ytd
10% US Index Trust - 25.4% ytd
10% Global Emerging Markets Local Currency Governmrnt Bond. - 11.8% ytd

https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?manager=LEGA&tab=fundOverview

About once a year I feed more cash into my ISA to rebalance.

You can open the ISA with £100 and I pay about £250 per month into the above funds.

(Usual blurb about past return not being an indicator of future returns)

Do your research. Find out about the different fees each company charges. Do they charge you to buy and hold funds. Do they charge you to trade buy and sell. Then look at the funds and how they have performed and what they contain.

I was lazy with my ISA. I already had an insurance policy with Legal and General - I could probably have found a better deal elsewhere and I could probably have found better funds to invest in. But it is growing nicely and I feed in cash.

My ISA is based on the slow and steady portfolio and I will cash it in when I plan to retire when Im 60.

https://monevator.com/passive-investing-model-portfolio/

Do your research. Do not rush in and buy funds piecemeal. Dont panic if a recession comes along and you lose 50% of the value of your ISA - the markets bounce back eventually so hold your nerve and feed in more money. Diversify. My funds are spread but probably overweighted US and Tech - but they have been the best performers.

When I chose my funds I was going to buy Groth Fund because of the returns but the ongoing charge is 1.53%

https://www.legalandgeneral.com/investments/funds/full-fund-range/equities-active/growth-trust/

I opted instead for the International Index Trust as the ongoing charge is only 0.53%

https://www.legalandgeneral.com/investments/funds/full-fund-range/equities-index-tracking/international-index-trust/

Platform fees and trading fees will eat into your profits.

I am biased towards Legal and General. There are cheaper platforms and better funds so do shop around.

I didn'topen a LISA becasue they didn't exist when I opened my ISA - also I don't want my funds tied up in case I need the money for any future emergency (like my daughters getting married!). If the Government is giving away free money grab it with both hands!

However the biggest downside is being unable to pay any more money into the LISA once you turn 50 and not being able to withdraw funds until you are 60 without getting a penalty of 25%.

Novice_investor101

One thing to check, OP. If you already have a cash LISA, you may not be able to open a Stocks & Shares LISA as well. You can only hold one of each type of ISA - cash & stocks LISA's falls into the bracket of one ISA type.
You could transfer from the cash to the stocks LISA tho.

Afraid of Kittens - I hold the L&G international Index trust class I fund in my S/S ISA with Fidelity & the charge is 0.13%? & It is even cheaper on HL, with a discount. The current unit price is a bit higher as well. Are these the same funds? Just interested why the L&G funds are so much more costly on L&G's own platform. I also hold the Global Tech index fund.

Afraid_of_Kittens

Novice_investor101 wrote: »

Afraid of Kittens - I hold the L&G international Index trust class I fund in my S/S ISA with Fidelity & the charge is 0.13%? & It is even cheaper on HL, with a discount. The current unit price is a bit higher as well. Are these the same funds? Just interested why the L&G funds are so much more costly on L&G's own platform. I also hold the Global Tech index fund.

No idea. One day will get around to comparing the different platforms and fees. I drip feed small amounts into R units so assume thats why there is a higher charge. I already had an insurance policy with L & G so that's the only reason I hold the S&S Isa with them.

Novice_investor101

Afraid_of_Kittens wrote: »

No idea. One day will get around to comparing the different platforms and fees. I drip feed small amounts into R units so assume thats why there is a higher charge. I already had an insurance policy with L & G so that's the only reason I hold the S&S Isa with them.

I had a look at the L&G website at their ISA - the R class is more expensive and appears to have a bid/offer spread as well. They have the I class which is showing as 0.13%. The difference in charges may account for the difference in current unit prices - £1.47 for the R class on the L&G site and £1.58 for the I class on Fidelity. The corresponding I class INC fund has a unit price of around £1.22 on fidelity.
Not sure if L&G charge a platform fee but Fidelity's is 0.35% so even with that added on it's 0.48%. I think you can get the same fund cheaper elsewhere.....

Albermarle

Not sure if L&G charge a platform fee but Fidelity's is 0.35% so even with that added on it's 0.48%. I think you can get the same fund cheaper elsewhere.....

L& G have no platform fee or fund switching charges etc . So you just pay whatever the fund OCF is .

Just interested why the L&G funds are so much more costly on L&G's own platform.

I think historically they could charge more as they were a very well known household name . However they have to modify their prices in a more competitive environment .
Their typical index fund is 0.5% . So not the cheapest but in a similar ball park to some other players .

Alexland

Novice_investor101 wrote: »

One thing to check, OP. If you already have a cash LISA, you may not be able to open a Stocks & Shares LISA as well. You can only hold one of each type of ISA - cash & stocks LISA's falls into the bracket of one ISA type.

You can hold as many adult ISAs as you like. The rule is you can only contribute new money into one of each type in each tax year.

As such if the OP has already made Cash LISA contributions this tax year they will not be able to make contributions into another LISA this tax year.

They can of course transfer their Cash LISA to a S&S LISA provider who accepts inbound transfers (eg AJ Bell if under 40 due to software limitations) and continue to contribute up to the £4k limit.

Once the LISA is with AJ Bell they could keep some in cash (to support an property purchase partial withdrawal) and invest the rest for age 60+. Even after the purchase they could continue to contribute until age 50.

Alex

Novice_investor101

Alexland, I was thinking that the OP said that they are 40 in 6 months - which is next April!
What LISA options that are available depend on if age 40 falls before or after the end of the tax year, OP.....

girllikeme1

It's in the 2020/21 tax year I'll turn 40 :j

I have contributed to my Cash LISA this tax year.

So am I allowed to keep my Cash LISA as is, and open a S&S LISA for the new tax year 20/21 (a month before I turn 40)?

Or even open a S&S LISA now and just not contribute until after 1 April 2020, so as not to have contributed to 2 LISAs in one year?

girllikeme1

Alexland wrote: »

Once the LISA is with AJ Bell they could keep some in cash (to support an property purchase partial withdrawal) and invest the rest for age 60+. Even after the purchase they could continue to contribute until age 50.
Alex

Thanks, should have said I am already a homeowner so this would be saving for age 60.