LISA Newbie

noobyinvestor

Hi All,

My Son's Child Trust Fund is due to come to an end as he turns 18 soon.  Am trying to make sense of whether its worth him having a LISA with Forester or a S&S ISA with someone like Vanguard.  I have read just now that a LISA can be a S&S LISA also, and that the yearly limit is £4k with a government added contribution of 25%.  Can anyone advise in these examples if I am correct in my understanding:

- Invest year one in S&S LISA with Forester on the S&P500 the value of £1k.  Market goes up 10% so now investment is £1.1K.  Then government add 25% at year end he now has £1,375

- If the above is correct and he gets to the point of having more than £4k in the LISA (e.g. £50K), he will only ever get a government contribution of £1k MAXIMUM in any given year


Thanks all : )

Alexland

Firstly read the Lifetime ISA guides carefully

https://www.moneysavingexpert.com/savings/lifetime-isas/

https://www.gov.uk/lifetime-isa

Each month the LISA manager adds up any contributions between the 6th of the previous month and the 5th of the current month and submits a 25% bonus claim to the government which takes a few weeks to be paid into the account. So the 25% bonus is added around 1-2 months after each contribution. The bonus can then be invested. He can add up to £4k during each tax year to get 25% bonus(s) on those contribution(s) of up to £1k per tax year. The bonus is based on the contribution(s) not the account balance, growth, etc.

I have no idea why you would want to go with a Forester LISA or why you would limit your investment to the US only (not that they offer S&P trackers just their own very expensive fund). Have you looked at EQi who offer a LISA account giving access to globally diversified index and multi asset funds from HSBC, Vanguard, L&G, etc? Remember S&S investing is for periods of at least 5-7 years preferably longer to reduce the chance of selling at a loss.

bhjm

pay in 1.000 - top up 250
pay in 4.000  top up 1000
if you invest 4000 and the investment would half or would even double, the topup is not affected by this

cooldude255220

noobyinvestor said:

- Invest year one in S&S LISA with Forester on the S&P500 the value of £1k.  Market goes up 10% so now investment is £1.1K.  Then government add 25% at year end he now has £1,375

No. The government bonus is based on the contributions you make, not any gains or losses from the market.

Another_Saver

I hadn't heard of Forester before this post so I can't comment on them, or their funds. Why are you only looking at a US fund? The US is very fully valued.
As covered above the government top up is based on what you pay in.

noobyinvestor

Hi All
Thanks for the helpful comments. I will have to take some time to digest the information in the links.  FYI I mentioned Forester as this is the name on the letter we were sent as the money is with them (I don't have any favouritism for them).  Although I have not seen what investments within the LISA Forester office I assumed they would have the S&P 500 and that it would be a reasonable choice for a 5y+ investment so i used that as an example.

So it appears that any 25% Government top-up is only for payments he makes in any given year and he wont get subsequent top-up for money left in the account from the previous years.  Does this sound correct?

Thanks again.

Albermarle

Forestry is a friendly society and normally their products are bad value for money .
Like Alexland said It appears that their LISA is invested in a with profits fund with a 2% ! annual charge . No possibility to invest in anything else .

Alexland

noobyinvestor said:

So it appears that any 25% Government top-up is only for payments he makes in any given year and he wont get subsequent top-up for money left in the account from the previous years.  Does this sound correct?

Yes that's correct.

ratechaser

Albermarle said:

Forestry is a friendly society and normally their products are bad value for money .
Like Alexland said It appears that their LISA is invested in a with profits fund with a 2% ! annual charge . No possibility to invest in anything else .

Although to be fair to the Foresters (or rather the Ancient Order of Foresters as I knew them in my days of pseudo Masonic involvement with the society) they did once have a 25 year endowment  paying a guaranteed 12% PA tax free. I just wish I'd taken out a bigger policy... but that's hindsight for you.

Of course that was back in the 90s and probably was about the last truly good product they offered!

Albermarle

Friendly societies played an important role in the past , offering  financial products and support for low income and vulnerable communities . Also some had a kind of organisational ritual associated with them .
However as a supplier of competitive financial investments , even for low amounts , those days seem to be over .

Alexland

Albermarle said:

Forestry is a friendly society and normally their products are bad value for money .

Who are Forestry? Or even Forester who the OP mentions?

ratechaser said:

Although to be fair to the Foresters (or rather the Ancient Order of Foresters as I knew them in my days...

I was a bit unclear if the existing CTF is with Foresters Financial (The Independent Order of...) or Foresters Friendly Society (The Ancient Order of...) but figured it doesn't really matter as they both have unattractive CTF and LISA products with their own bespoke expensive funds.