LISA after 40

Nurse2047

Hi I recently moved my cash LISA to a s&s LISA to EQI at age 42. EQI are now closed to new customers however can’t find another provider who would accept my husbands cash LISA to a s&s LISA? I’ve looked at many and they only accept before 40 any transfers... 

Alexland

Although it's allowed under the rules I am not aware of any S&S LISA providers currently accepting transfer requests from people aged 40 or older. It may be worth emailing AJ Bell to at least show there is demand for this as they are generally positive towards LISAs and it seems they just haven't got around to updating their application process.

masonic

I thought EQi LISA holders had a reprieve in that EQi would continue to manage their accounts for the time being.

Alexland

masonic said:

I thought EQi LISA holders had a reprieve in that EQi would continue to manage their accounts for the time being.

Yes but it's the OP's husband still in a Cash LISA somewhere.

I can't imagine it's economical to keep the EQi platform going for just a small number of accounts so it would be reasonable to expect them to transfer to Onefamily as happened when II bought The Share Centre although I doubt either group of customers (particularly the EQi ones) would be happy with the uninspiring Onefamily investments. Perhaps the delay in agreeing and announcing this is because Onefamily are either still busy with the previous transfer, no longer want to grow their business in this way or are concerned about the negative customer feedback they might get?

While there appear to be no retail platforms offering transfers for 40+ there are a number of registered platforms used by advisors which might support it but the amounts concerned are unlikely to be enough to interest an advisor for ongoing service unless perhaps it's possible to get onto these platforms on a transactional advice basis - dunstonh might comment on if this is possible for a fee?

I still think II are missing a trick not offering LISAs as an increasing proportion of the younger demographic that platforms tend to be targeting will be holding or interested in these accounts and after a few years the valuations have started to become a bit more significant. Ours will be up to around £65k across both when we have made this tax years' contribution so I am starting to think of them as within our group of 'main' accounts. If a couple had invested their LISAs into SMT - they would probably be in six digits by now.

Tugboat

It criminal really that once beyond 40 and you hold a Cash Lisa that you cannot transfer out into S&S. The lack of competition for this product is awful. 

masonic

Tugboat said:

It criminal really that once beyond 40 and you hold a Cash Lisa that you cannot transfer out into S&S. The lack of competition for this product is awful. 

If it was due to lack of competition, then it would be a problem for everyone. Yet those under 40 have a few options. I've not yet seen anything from the Financial Ombudsman on this issue (just a couple of cases around delays causing people approaching 40 when they applied for a new LISA to lose out). I think it would be interesting to test the fairness of this unnecessary restriction, given it has no basis in the ISA regulations.

kuratowski

The restriction is unnecessary per regulations, but what would make it unlawful?  It's got to be a commercial decision the providers have made, i.e. the costs of software development to support opening accounts for over 40s to transfer-in are unlikely to be recouped from the fees earned from those doing so.

There simply aren't many S&S LISAs in existence at all: Admittedly the figures on gov.uk are only available up until 2018-19, but they show only 200k LISAs out for 11m total ISAs.  The overall proportion of Cash ISAs : Stocks & Shares ISAs is roughly 4:1, so we can guesstimate that the number of S&S LISAs in existence might be not far off from ~40k.

LISAs have only existed for a few years, so those aged 40+ have had a very small number of years in which to open and subscribe to them.  Coupled with the low annual subscription limit, the average account valuation of LISAs held by over 40s will necessarily be low.

Yes, the above figures are a couple of years old, but we've had a pandemic since then and we know that the rules were altered allowing people to make early withdrawals from LISAs without the 6.25% penalty, it is reasonable to assume that some people did so, so it's not at all obvious that the total amounts held within LISAs will be substantially higher today.

So, in all likelihood, there aren't enough LISA assets in play at the moment held by those age 40+ to recompense providers who bother to adapt their systems.  This could change in future, as the cohort who were eligible to open LISAs in their early 20s get older, however.

I really like LISAs (who doesn't enjoy a government bonus) and I do think it's a crying shame that there is so little awareness, outside of forums such as this, of their potential utility for retirement saving.  But the commercial limitations of the product are inherent in its design: the age restrictions, the subscription limits, and the 6.25% penalty for early withdrawal all combine to make LISAs a bit of a minority sport.

Alexland

kuratowski said:

The restriction is unnecessary per regulations, but what would make it unlawful?

I guess there could be an argument that by not accepting transfers from 40+ people while allowing transfers for younger people some LISA managers could be breaking the equality act? Similar to if they chose to deny transfers based on gender or ethnicity. They don't seem to have any defence in the LISA product requirements to defend this restriction.

kuratowski

Financial services has an exemption to age discrimination specifically:

Financial service providers will be able to continue to use age banding and age limits and to specialise in products only for certain age groups. There will be no need to objectively justify age discrimination in the context of the provision of a financial service.

Age discrimination ban in services and public functions: A guide for financial services - GOV.UK (www.gov.uk)

However, the financial ombudsman does tend to exercise a lot of discretion, they might hold customer treatment to be unfair even if it's lawful.  I think it would be interesting if this did go to the ombudsman, as Masonic says.

Alexland

kuratowski said:

Financial services has an exemption to age discrimination specifically:

But that only allows them to discriminate on products - would it allow them to discriminate on offering a transfer to a product where they already have customers over 40? It seems to be unnecessary age discrimination unrelated to the product.

masonic

kuratowski said:

However, the financial ombudsman does tend to exercise a lot of discretion, they might hold customer treatment to be unfair even if it's lawful.  I think it would be interesting if this did go to the ombudsman, as Masonic says.

The Ombudsman adjudicates complaints on fairness principles, not primarily the law, and issues its legally binding decisions based on what it considers fair treatment of the customer. I think it could be effectively argued that it is unfair on a customer over the age of 40 to prevent them from transferring a LISA, when the process is identical to that used for customers under 40 and the account is likely to be even more profitable for the firm to hold than a typically smaller account held by a younger investor. There is also a lower burden on future administration, since the account has fewer years where bonus claims can be made. If I were the complainant, I would liken it to a firm not accepting transfers from customers whose national insurance number ends with a 'B', or whose surname starts with a vowel. It is completely arbitrary and therefore unfair.