Bail on LISA or keep?

Morrigan_2020

eskbanker said:

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....

Ok that makes sense, I hadn't thought of it like that.  Just had a look at the 'best buys' and Nutmeg looks ideal but annoyingly they don't allow transfers in yet. 

Alexland

With sensible S&S investment funds the longer you hold them the less risk of a negative outcome. Time dilutes risk. The below article might help.
https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/
Cash is unsuitable for long term retirement saving as the rate of return is usually below inflation so the money's spending power goes down over the years burning your bonus.
The investment returns we have seen in our LISAs in the past nearly 4 years since launch are now greater than the 25% bonus despite the valuations dropping during a stock market correction and crash although future returns may be lower.
After a while you grow a tough skin and accept that day to day volatility is the price you pay. I look forward to the next crash as our contributions and dividend reinvestment will buy more cheaper fund units. It's just the way global equity markets gradually deliver their superior returns.

Albermarle

S & S LIsa's are a bit thin on the ground . Most people with LISA's are using them for a potential first time buyer house purchase. In this case a S&S Lisa is not recommended as the time scale is usually too short. For any S&S investment it is recommended to keep at least 10 years . Basically in the short /medium term investments can go up and down but the long term trend is always up ( for the last couple of hundred years anyway ) .

Morrigan_2020

Alexland said:

With sensible S&S investment funds the longer you hold them the less risk of a negative outcome. Time dilutes risk. The below article might help.
https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/
Cash is unsuitable for long term retirement saving as the rate of return is usually below inflation so the money's spending power goes down over the years burning your bonus.
The investment returns we have seen in our LISAs in the past nearly 4 years since launch are now greater than the 25% bonus despite the valuations dropping during a stock market correction and crash although future returns may be lower.
After a while you grow a tough skin and accept that day to day volatility is the price you pay. I look forward to the next crash as our contributions and dividend reinvestment will buy more cheaper fund units. It's just the way global equity markets gradually deliver their superior returns.

Thank you, that article was a really useful for a complete beginner!  Seeing as I'm not planning to withdraw for nearly a quarter of a century I do feel better about the prospect now!  My other concern is not leaving myself short of easier to access savings hence I've been quite conservative about what I've put in, but over time it will add up and my contributions will increase too.

Thanks! 

Morrigan_2020

No transfers into the Nutmeg LISA, and no transfers from other LISAs into the Hargreaves Lansdown one! 

Not keen to pay £1 a week with Moneybox on such a small investment, so looks like its AJ Bell, unless anyone has any other recommendations?

Thanks again

Alexland

Morrigan_2020 said:
Just had a look at the 'best buys' and Nutmeg looks ideal but annoyingly they don't allow transfers in yet. 

Nutmeg are well suited to new investors and we have used them before as they were one of the first to launch LISAs (and had attractive cashback offers on S&S ISAs). Their fixed allocation portfolio management is not cheap at 0.45% (compared to S&S ISA platforms stating at 0.15%) but then there's not much cheaper for small LISAs (apart from EQi who are best avoided due to impending II takeover, or possibly AJ Bell depending how often you trade at £1.50).
If Nutmeg are not accepting transfers you could just withdraw from your current LISA this tax year (with the penalty relaxed to 20%) and start again next tax year on 6th April if still under 40? It doesn't sound like you would expect to use the full £4k annual allowance anyway.
Once the accounts get bigger you may find other LISA platforms cheaper depending on your contribution pattern and investment choices so be sure to reevaluate the market before your 40th birthday.
Our LISAs are now with AJ Bell but you would need to pick your oun funds rather than the simple 1-5 scale of Nutmeg fixed portfolios. Still there are simple multi asset and tracker funds on AJ Bell from Vanguard, HSBC, etc that do the same job.

Morrigan_2020

Thank you, but unfortunately if I withdraw I still lose 20% (around £80), which I might have accepted if I was giving up on the whole LISA idea completely, but if not it seems daft to throw it away!  

Are you happy with AJ Bell?  I would be looking at low - medium risk and fully managed seeing as I clearly have no idea what I'm doing! 

Alexland

Morrigan_2020 said:

Thank you, but unfortunately if I withdraw I still lose 20% (around £80)

But then if you stick it in a LISA again next tax year the bonus gets added back in again so no different from a transfer other than you will have used some of your annual allowance. Did you intend to use the full allowance?

Are you happy with AJ Bell?

Yes I once had a SIPP with AJ Bell so have known them for years and am a fairly experienced investor. Their 0.25% ongoing charge is good but the £1.50 fund trade fees can add up on a small account.

I would be looking at low - medium risk

It's not worth making low risk investments as like cash they are unlikely to keep up with inflation as they are usually stuffed with a high proportion of bonds which are likely to produce a low return. You need a medium to high amount of stock market equities exposure to get a good long term return. You derisk in the years leading up to withdrawal to get more certainty of outcome.

Fully managed seeing as I clearly have no idea what I'm doing! 

You can get simple to own multi asset funds on AJ Bell from respectable low cost fund managers such as the Vanguard Lifestrategy
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds
and HSBC Global Strategy fund series.
https://www.assetmanagement.hsbc.co.uk/en/intermediary/investment-expertise/multi-asset/hsbc-global-strategy-portfolios

Morrigan_2020

Alexland said:

Morrigan_2020 said:

Thank you, but unfortunately if I withdraw I still lose 20% (around £80)

But then if you stick it in a LISA again next tax year the bonus gets added back in again so no different from a transfer other than you will have used some of your annual allowance. Did you intend to use the full allowance?

Oh yeah, good point! 

What exactly do the £1.50 trade fees apply to?  Sorry to keep pumping you for answers, but as a beginner its really good to have a helpful human being explain it in a way that makes sense to me!

Alexland

Morrigan_2020 said:
What exactly do the £1.50 trade fees apply to? 

AJ Bell charge £1.50 every time you buy or sell investment fund units from the LISA cash balance (which comes from contributions, bonuses and any dividends that you get if you don't use an accumulating investment). But then their ongoing platform fee of 0.25% is lower than Nutmeg at 0.45% so it depends how often you trade but on a bigger account the £1.50 trade cost is less significant than the 0.20% cheaper ongoing charge. On both you would also pay around 0.20% to the fund managers too. With Nutmeg you don't have to worry about maintaining a big enough cash balance to pay ongoing fees or trading it's all automatic.