HL or AJ BELL for s&s LISA

SA100

Currently have a cash lIsa but looking to open a S&S Lisa in April. I will be putting the max in £4K spread over the year.

What platform would you advise? Or have experience with. I’m heading towards AJ bell at present.

Both AJB and HL to seem expensive for fees. I wish Vanguard would launch a LISA.

bowlhead99

If you put £1000 in each quarter this year from April while receiving 25% free money, ending up at £5000, your average account balance over the course of the whole year will be something like £2500-£3000.

At HL, an average balance of £3000 at 0.45% would result in a NAV based fee of £13.50
At AJB, the same average balance at 0.25% would result in a fee of £7.50. But you would need to spend £1.50 a time to buy the investments so if you are buying four chunks of investments you would spend £6 in transaction costs and have a total fee of about £13.50.

You can say this is 'expensive for fees' but you are essentially getting a £1000 government bonus plus hopefully some annualised investment growth of 5%+ for the price of a bottle of nice wine.

If you could use Vanguard at the price they offer their other types of accounts, your platform fees this year would be more like £4-5 instead of £13-14. However Vanguard have not offered the LISA account because LISAs can currently only hold relatively small amounts of money because of the restrictions on how much can be subscribed per year. They are not going to get rich from your £5 given it will cost them some time and effort to create and administer your account, claim bonuses and provide customer service on what is s more complex product than a normal ISA or general investment account. If you make a phonecall to ask them a question, by the time the customer service rep has helped you out and they've paid the employee for their time and got them a desk and a computer and space to sit and a supervisor etc etc; they have spent your £5.

So, I wouldn't get too hung up on how much better it would be if you could invest your few thousand for free or for the price of a cheap bottle of wine per year instead of a more midrange bottle of wine.

Next year you will start the year with closer to £5k than £1k so your average balance will be higher and the cost will be higher, and you'll get another free £1k of government money and make some more investment returns. As the balance goes up, the NAV-based fee at HL would go up faster than the NAV-based fee at AJ Bell while the transaction fees at AJ Bell are independent of the amount of money you have on the platform.

For what it's worth, I have accounts with AJ Bell and my average balance over the course of the year would probably be over 100x what yours would be. They are fine.

Drp8713

I am happy with the service from HL.

I pay a £45 fee per annum on what is currently a £19k LISA so less than 0.24%, and as the fee is capped, the % reduces with every contribution.

As Bowlhead says, you may on paper consider £45 a year expensive, but in the real world it cost me £9 for two doughnuts the other day, so to pay 5x that per annum to have my investments secure with a large provider, with a good app and good customer service isnt really a problem for me.

Linton

Mrs L has held an S&S ISA and a SIPP, now in drawdown, with AJBell for 7 years. The service has been excellent.

in_the_sheets

When you're looking at S&S LISA for retirement, it's a bit misleading to look at the year-one costs, when you're locked in until you're 60, which could be 40 years away.

Suppose you're going to buy VLS in year one, and leave it there for 40 years. AJB will be cheaper than HL. The £1.50 fees to buy in year one (and to sell in year 40) are pretty inconsequential. But you're paying 0.25% a year in holding charges. If you gone with VLS in a Vanguard S&S ISA (instead of a LISA), you'd pay 0.15% in holding charges. The extra 0.1% a year adds up to 4% over 40 years. That doesn't wipe out the 25% Government bonus for using a LISA, but it does eat into it significantly.

But it's worse than that. With the S&S ISA, when it grew to (say) £20,000+ value (either from investment growth on your year one investment, or by subscribing more money each year), you could get out of paying that 0.15% holding charges to Vanguard, which now amount to £30 a year, by instead switching to IWeb, where you pay a £25 account-opening fee but then no holding charges. If still adding money, you'd pay IWeb £5 each time you invest more, but this is pretty inconsequential if managed sensibly (e.g a lump-sum investment once a year). So you might soon be saving 0.25% a year in holding charges by using an IWeb S&S ISA instead of a AJB LISA. Over 40 years, that adds up to 10%! It's still less than the 25% Government bonus, though.

These numbers suggest taking a hard look at LISA-for-retirement before choosing it in preference to a normal pension. The LISA may superficially look better if you are a basic-rate or non-taxpayer, who doesn't have access to a salary sacrifice pension, and who has already fully taken up any employer-matched pension contributions (or DB pensions) available. In that the 25% bonus is arithmetically the same as the 20% tax relief that basic-rate or non-taxpayers can get on pension contributions; and the LISA will not be taxable on withdrawal in retirement, but the pension will (except for the 25% PCLS). But if you're going to lose 4% or 10% from the LISA is higher charges, because it's such an obscure product, will that be more or less than the tax you might pay on drawing the pension?

The big unknown here is: will LISA become more mainstream, with more providers, and charges similar to S&S ISAs or pensions, over time? Or will it be scrapped by some future Chancellor of the Exchequer (for new contributions), and become a dead-end product, which might fall further behind the mainstream tax wrappers in choice of providers and charges?

SA100

Thanks for the reality check, I’ll go with AJB for the cheaper long term costs.