Can I open another LISA account after 40 when I already have one?

johnnybaloney

Hi,

I found the Lifetime ISAs guide a little confusing around this matter. It states:

Once you're over 40, you can continue to put money into the LISA until the day before your 50th birthday. 

And, if you want to transfer it to a new provider, for example to get a better interest rate, this is allowed – and then you can add to it. You just can't open another for new money only.

Then it also states the following:

You can hold more than one LISA at any one time, provided that you only pay in to one in each tax year.

So let's say I'm 41. I have a LISA with a provider A, maxed it out and want to keep it. A new tax year starts and I now want to open one with provider B but I do not want to transfer out from A. Is this allowed?

The first quote seems to suggest it isn't but then I cannot see any reason why to allow the freedom of opening 'fresh' accounts when I'm under 40 and then stop me from opening new accounts after that age (unless I'm willing to transfer).

masonic

No, you cannot open a new LISA without transferring in an existing one if you are age 40+. You'll struggle to find a provider that will even permit you to do so when transferring. The reason for the inability to open a new LISA is that you are approaching the point at which you could cash in penalty free - the limit could have been set at anything, but 20 years was chosen. I don't know what the logic of staggering the cut off dates is (i.e. why you are allowed to contribute to an existing LISA between the ages of 40-49).

johnnybaloney

It seems a strange rule. If some or most providers don't want my business for LISA's shorter than 10 years then why not leave it to them to decide instead of imposing it as a rule. Besides, I could transfer out after one year regardless of my age, so I can't understand what benefit of this rule is to anyone.

I suppose, one way around it, if I was determined to have a choice after 40, would be to open an account with a new provider each year before I reach 40.

masonic

johnnybaloney said:

It seems a strange rule. If some or most providers don't want my business for LISA's shorter than 10 years then why not leave it to them to decide instead of imposing it as a rule. Besides, I could transfer out after one year regardless of my age, so I can't understand what benefit of this rule is to anyone.

I suppose, one way around it, if I was determined to have a choice after 40, would be to open an account with a new provider each year before I reach 40.

The rule is not based on what providers may or may not want, it is there to prevent Government money being allocated to those who the Government deems unworthy of being given a bonus to start saving towards retirement. It is easier for them to place a blanket ban on new accounts for those age 40+, because HMRC only receives information about money paid in as a snapshot after the end of each tax year, so they cannot establish whether someone still holds a separate LISA elsewhere. So the providers police the system for HMRC by preventing those aged 40+ from opening a new LISA without transferring in an existing LISA.

Opening multiple S&S LISAs would lead to you paying higher fees and would result in it being more difficult to administer your investments as a single coherent portfolio, but you'd be at liberty to do as you suggest.

johnnybaloney

Thank you masonic, also for answering another of my questions in a different thread.

wannabe_a_saver

masonic said:

johnnybaloney said:

It seems a strange rule. If some or most providers don't want my business for LISA's shorter than 10 years then why not leave it to them to decide instead of imposing it as a rule. Besides, I could transfer out after one year regardless of my age, so I can't understand what benefit of this rule is to anyone.

I suppose, one way around it, if I was determined to have a choice after 40, would be to open an account with a new provider each year before I reach 40.

Opening multiple S&S LISAs would lead to you paying higher fees and would result in it being more difficult to administer your investments as a single coherent portfolio, but you'd be at liberty to do as you suggest.

Would it be sensible to have at least 2 open before 40 would you think?  I'm currently 36, I withdrew my money from the Skipton cash LISA last year while the penalty was suspended and plan to put it into S&S on 1st April instead, but would it make sense to open a second S&S with a different provider at 39 years and 11 months just to have at least some flexibility? 

It does seem like there will be more and more people in the OP's situation, I wonder if its something Martin Lewis would be interested in once more pressing matters are less urgent! 

Alexland

wannabe_a_saver said:

Would it be sensible to have at least 2 open before 40 would you think?

It does seem very cautious and I remember having a PM chat with masonic when I was considering opening a second LISA before 40. The problem is that unless you intend to stick to percentage platform charges (my LISA fees are already capped on holding an ETF) then it doubles up the platform fees which are still not insignificant when multiplied for a couple of decades. Even then there is no certainty that if you had reason to leave one of your two LISA providers the other one would (still) accept the inbound transfer. In the end I decided that AJ Bell were large and stable enough as a FTSE250 company that I would trust them to keep the charges reasonable for a couple of decades if the market doesn't further develop. AJ Bell have only last month increased their capping level (first change for years) so I expect their pricing should be fairly stable for at least the next 3+ years.

wannabe_a_saver

Alexland said:

wannabe_a_saver said:

Would it be sensible to have at least 2 open before 40 would you think?

It does seem very cautious and I remember having a PM chat with masonic when I was considering opening a second LISA before 40. The problem is that unless you intend to stick to percentage platform charges (my LISA fees are already capped on holding an ETF) then it doubles up the platform fees which are still not insignificant when multiplied for a couple of decades. Even then there is no certainty that if you had reason to leave one of your two LISA providers the other one would (still) accept the inbound transfer. In the end I decided that AJ Bell were large and stable enough as a FTSE250 company that I would trust them to keep the charges reasonable for a couple of decades if the market doesn't further develop. AJ Bell have only last month increased their capping level (first change for years) so I expect their pricing should be fairly stable for at least the next 3+ years.

So the important decision is where your LISA funds are on your 40th birthday!  Good point.