Cash Lisa to move or not to move?

katkatmachine

Hi,
I have a Cash Lisa with Skipton for over a year now, total is £2700 including bonus. I was supposed to use the funds for our house purchase but my partner insisted not to add it anymore in the deposit but just to save it for my retirement. Now my problem is it’s in Cash Lisa. I really thought that I would use for it for the house that’s why i put it in cash. Now im thinking if i should move it to stock lisa  since it’s for my retirement anyway, or shall i just leave it there? I’m 30 by the way so i have 20 more years to invest in lisa. I save £100 a month in to my lisa. 

Please let me know your thoughts on this. 

Thank you,
Kat

eskbanker

Yes, it makes sense to transfer to a S&S LISA if it's money earmarked for the long term, as investment growth over 30 years is practically guaranteed to outperform savings performance by a significant margin....

katkatmachine

Hi,
I just want to update this thread. After a year of not doing anything in my cash Lisa, I am now decided to finally move it to a Stocks and Shares Lisa. I'm planning to move it to AJ Bell because based on my research they are one of the few that accept transfers from another provider. I just have a few questions, can you please assist me?

1. As per link below,  it says "The AJ Bell Youinvest Lifetime ISA has been designed for investing in shares and funds. Investments don’t offer the same security as cash and can fall in value – meaning you could get back less than you invest", so once I transfer, they will invest my funds along with my bonuses in shares and funds right? Can you please confirm that? I don't see any option of a cash Lisa in AJ Bell so I am assuming everything that I will transfer will be invested. Is that correct?
https://www.youinvest.co.uk/lifetime-isa/transferring-into-a-lifetime-isa
2. Will I still receive my bonus and they will be invested too?
3. With AJ Bell Lisa, can I select the fund where they will invest my money and bonus?

 About me: I'm 31 now with only £3200 in my cash lisa in Skipton, I am saving £100 per month. I plan to use the funds for retirement. I already have a pension account from my employer, still small though since I only started contributing when I was 27.

Thank you.

Kind regards,
Kat

eskbanker

Yes, A J Bell only offers a S&S LISA, not a cash one, so it is a product to be used for investing - you're in control of that process, so yes, you need to choose what to invest in, both the capital and the bonuses too....

grumiofoundation

Watch out for the AJ Bell charging structure - £1.50 per transaction (for fund purchases).


If you are planning to invest £100 each month thats 12 transactions (£1.50 = 1.5% of each purchase) I guess you may set up a regular investment?

Because of the way LISA bonus is paid you will have another 12 x £25 appearing between 5-7 weeks after deposit (depending when exactly in month you pay in). 

If you went in and manually invested all these as and when they appear that would be another 12 x £1.50 you would need to pay (would be 6% of each £25 investment).


https://www.youinvest.co.uk/lifetime-isa/charges-and-rates

Kynthia

grumiofoundation said:

Watch out for the AJ Bell charging structure - £1.50 per transaction (for fund purchases).


If you are planning to invest £100 each month thats 12 transactions (£1.50 = 1.5% of each purchase) I guess you may set up a regular investment?

Because of the way LISA bonus is paid you will have another 12 x £25 appearing between 5-7 weeks after deposit (depending when exactly in month you pay in). 

If you went in and manually invested all these as and when they appear that would be another 12 x £1.50 you would need to pay (would be 6% of each £25 investment).


https://www.youinvest.co.uk/lifetime-isa/charges-and-rates

Would another provider be a better choice for someone wanting to contribute monthly to a relatively small LISA?

I was looking at Hargreaves Lansdown and they charge 0.45% a year but don't charge for buying and selling funds. However they then say they do charge per deal for shares, gilts, bonds, etc which I find confusing.

katkatmachine

grumiofoundation said:

Watch out for the AJ Bell charging structure - £1.50 per transaction (for fund purchases).


If you are planning to invest £100 each month thats 12 transactions (£1.50 = 1.5% of each purchase) I guess you may set up a regular investment?

Because of the way LISA bonus is paid you will have another 12 x £25 appearing between 5-7 weeks after deposit (depending when exactly in month you pay in). 

If you went in and manually invested all these as and when they appear that would be another 12 x £1.50 you would need to pay (would be 6% of each £25 investment).


https://www.youinvest.co.uk/lifetime-isa/charges-and-rates

Thank you so much for explaining the fees. So is it more logical if I just save the £1200 GBP that I would accumulate in a year then put in the AJ Bell Stock Lisa in one go? In that way I will only pay £1.50 when I transfer it and another £1.50 once the bonus comes? Or maybe I can do it twice a year, £600 every 6 months? Either way it's better than the £100 monthly that I initially planned, right?

grumiofoundation

I think it would certainly make sense to bundle the contributions up together in some way. Maybe a few times a year as you suggest.

I have not used AJ Bell myself so can't comment on the practicalities of using it - hopefully someone who does can comment.  But it looks like you are able to set up a regular investment for the amount you want to invest, say £500, and in the months where not enough has been paid yet in this just won't go though.
https://www.youinvest.co.uk/our-services/regular-investments

Kynthia said:

grumiofoundation said:

Watch out for the AJ Bell charging structure - £1.50 per transaction (for fund purchases).


If you are planning to invest £100 each month thats 12 transactions (£1.50 = 1.5% of each purchase) I guess you may set up a regular investment?

Because of the way LISA bonus is paid you will have another 12 x £25 appearing between 5-7 weeks after deposit (depending when exactly in month you pay in). 

If you went in and manually invested all these as and when they appear that would be another 12 x £1.50 you would need to pay (would be 6% of each £25 investment).


https://www.youinvest.co.uk/lifetime-isa/charges-and-rates

Would another provider be a better choice for someone wanting to contribute monthly to a relatively small LISA?

I was looking at Hargreaves Lansdown and they charge 0.45% a year but don't charge for buying and selling funds. However they then say they do charge per deal for shares, gilts, bonds, etc which I find confusing.

AJ bell will still be cheaper for you based on current fees.

Each years contributions of £1200 will cost £2.40 extra (0.02%) per year with HL vs AJ Bell, over 29 years this will outweigh the one-off £1.50 fees. And even more so if you invest more in the future. 

cfw1994

katkatmachine said:

grumiofoundation said:

Watch out for the AJ Bell charging structure - £1.50 per transaction (for fund purchases).
If you are planning to invest £100 each month thats 12 transactions (£1.50 = 1.5% of each purchase) I guess you may set up a regular investment?
Because of the way LISA bonus is paid you will have another 12 x £25 appearing between 5-7 weeks after deposit (depending when exactly in month you pay in). 

If you went in and manually invested all these as and when they appear that would be another 12 x £1.50 you would need to pay (would be 6% of each £25 investment).

https://www.youinvest.co.uk/lifetime-isa/charges-and-rates

Thank you so much for explaining the fees. So is it more logical if I just save the £1200 GBP that I would accumulate in a year then put in the AJ Bell Stock Lisa in one go? In that way I will only pay £1.50 when I transfer it and another £1.50 once the bonus comes? Or maybe I can do it twice a year, £600 every 6 months? Either way it's better than the £100 monthly that I initially planned, right?

The downside to that is you are removing the "smoothing" element of regular contributions.   If you did a 6 month contribution, & it was last Feb, that would be a painful thing compared with monthly from Feb to July, given the way the markets moved....so it is a judgement call.   Or guess ;-)

katkatmachine

cfw1994 said:

The downside to that is you are removing the "smoothing" element of regular contributions.   If you did a 6 month contribution, & it was last Feb, that would be a painful thing compared with monthly from Feb to July, given the way the markets moved....so it is a judgement call.   Or guess ;-)

That's true. I might make it every three to four months. I might be paying more fees but it will give me a better average price if the contribution is done regularly than just once/twice a year.I can only set aside £100 per month for Lisa but hopefully in the future I'll be able to add more. 

Albermarle

To be clear , within the S&S Lisa , there is a cash account .
When you transfer over your cash LISA, the money will go into this cash account . Then you choose ( in your own time ) where to invest it by choosing investment(s) from the AJ Bell website .  One tip is leave some in the cash account as this is where AJ Bell take their fees from . Something like £25 should be enough to begin with .
I was looking at Hargreaves Lansdown and they charge 0.45% a year but don't charge for buying and selling funds. However they then say they do charge per deal for shares, gilts, bonds, etc which I find confusing.
With all providers they charge extra for buying and selling individual shares , bonds etc , because they have to be bought through a broker in the City in real time.  As a smaller investor you should stick to funds , so this does not affect you.