Bail on LISA or keep?

Morrigan_2020

Would love any thoughts or advice on this! 

I opened a LISA just over a year ago (mostly just in case they were withdrawn to give myself the option).  There is only about £400 in it at present (including the bonus).  With the pandemic meaning that the rules have changed and there is a window till April to withdraw penalty free I am considering the pros and cons of keeping it.  

Pros:
 - 25% government bonus beats all other savings rates
 - Can access at 60, while I can't access most of my NHS Pension until 68 (might go up too before then.)
 - Can take money out in desperate circumstances but the penalties will discourage this and encourage me to save
 - Tax free when I withdraw it

Cons:
 - Can't withdraw until 60 (another 24 years)
 - That's all I can think of! 

What would you do?

grumiofoundation

If you are planning to use the LISA for retirement then a Stocks and Shares LISA is more suitable (I assume you have a cash LISA as you are talking about savings rates?).

Morrigan_2020

I am talking about a cash LISA, why do you feel that stocks and shares is more suitable?  These are only relatively small amounts and I'm not a huge risk taker with money!

Albermarle

If you want to retire before 67/68 then you will need money to fund those years. So if it is not a Lisa then it will have to be something else, so in the absence of any info about your general financial position ( savings , other investments , partners position etc ) it would seem Lisa is  the best bet. As it would be for at least 14 years you would better off in a Stocks and shares Lisa rather than a cash lisa, as normally you would expect to see significantly more growth in investments than cash over a 14 year period.
You have detailed the pros and cons correctly . The ability to withdraw penalty free for a short period has no real relevance to your decision.

Morrigan_2020

Albermarle said:

If you want to retire before 67/68 then you will need money to fund those years. So if it is not a Lisa then it will have to be something else, so in the absence of any info about your general financial position ( savings , other investments , partners position etc ) it would seem Lisa is  the best bet. As it would be for at least 14 years you would better off in a Stocks and shares Lisa rather than a cash lisa, as normally you would expect to see significantly more growth in investments than cash over a 14 year period.
You have detailed the pros and cons correctly . The ability to withdraw penalty free for a short period has no real relevance to your decision.

Thanks, I am not necessarily planning to retire early, but I think it would be sensible to have options as we never know what life throws at us!  Especially as my NHS pension age is now linked to state pension age and there's no way of knowing how high that might go between now and then! 

I'd have to look into the S&S option, I'm quite risk averse and can't imagine wanting a product that could lose me money.  Especially as the 25% bonus means the gains will have been substantial without the risk.  Also, I may not be able to put the full £4000 in each year.  I am single and currently earn just over 2k/m after tax and I obviously need to keep a good sized pot more accessible. 

Morrigan_2020

I've just updated my OP because I've added a decade to my age!  Its 14 years till I have to stop paying in at 50, and 24 years till I can withdraw at 60.  Sorry about that!

Alistair31

£400 in a cash LISA for retirement is a waste of time and money. 

Morrigan_2020

Alistair31 said:

£400 in a cash LISA for retirement is a waste of time and money. 

Well I'm not planning on leaving it at 400!  That's just what I've managed in the first year, that will increase too hopefully.  I got a pay rise last year and am building all my savings pots slowly but surely.

I'm curious as to how its a waste though, even if its only a small amount its a small amount getting a 25% bonus that doesn't actually cost me any time or money? 

Albermarle

Morrigan_2020 said:

Alistair31 said:

£400 in a cash LISA for retirement is a waste of time and money. 

Well I'm not planning on leaving it at 400!  That's just what I've managed in the first year, that will increase too hopefully.  I got a pay rise last year and am building all my savings pots slowly but surely.

I'm curious as to how its a waste though, even if its only a small amount its a small amount getting a 25% bonus that doesn't actually cost me any time or money? 

I think he means that its not very much if you do need some financial back up to retire early, especially if it is left to stagnate in a low interest account.
I'd have to look into the S&S option, I'm quite risk averse 
If you leave it in a cash account with low interest you are guaranteed to lose money ( or value to be more precise) due to inflation , so that sounds pretty risky to me . On the other hand nobody who has invested for more than 14 years has ever lost money , so in fact it is the less risky option, despite short term periods of volatility.
Have a look at these as a starter.
Investing for beginners: Why do we invest? - Monevator
Investing for beginners: how to get started (moneysavingexpert.com)
and reading this forum can be useful as a lot of new/inexperienced investors ask questions.

Morrigan_2020

Albermarle said:

Morrigan_2020 said:

Alistair31 said:

£400 in a cash LISA for retirement is a waste of time and money. 

Well I'm not planning on leaving it at 400!  That's just what I've managed in the first year, that will increase too hopefully.  I got a pay rise last year and am building all my savings pots slowly but surely.

I'm curious as to how its a waste though, even if its only a small amount its a small amount getting a 25% bonus that doesn't actually cost me any time or money? 

I think he means that its not very much if you do need some financial back up to retire early, especially if it is left to stagnate in a low interest account.
I'd have to look into the S&S option, I'm quite risk averse 
If you leave it in a cash account with low interest you are guaranteed to lose money ( or value to be more precise) due to inflation , so that sounds pretty risky to me . On the other hand nobody who has invested for more than 14 years has ever lost money , so in fact it is the less risky option, despite short term periods of volatility.
Have a look at these as a starter.
Investing for beginners: Why do we invest? - Monevator
Investing for beginners: how to get started (moneysavingexpert.com)
and reading this forum can be useful as a lot of new/inexperienced investors ask questions.

Thank you I will look at those links.  I understand that a low interest account will lose money over time, but this is essentially a 25% interest account, isn't it?  So does the same really apply?

eskbanker

Morrigan_2020 said:
I understand that a low interest account will lose money over time, but this is essentially a 25% interest account, isn't it?  So does the same really apply?

But that (one-off) 25% would effectively be spread over 24 years for the money that's in there so far, i.e. more like a 1% account (plus the actual interest of course).  Future contributions would spread that 25% over fewer years so that dilution effect becomes less pronounced over time, but seeing it as a 25% interest account still isn't a particularly accurate way of looking at it....