Should I open a LISA? 2 November 2021 at 9:16PM edited 2 November 2021 at 9:19PM in ISAs & tax-free savings 5 replies 145 views

w00519773

I am 40 years old on Friday.  I asked this question recently: https://forums.moneysavingexpert.com/discussion/6265215/lisa-v-additional-pension-contributions#latest.  This question asked about the benefits of contributing to a pension plan v a LISA.

I am forty years old on Friday and I am debating whether to open a LISA.  I am a lower rate tax payer, just.  I expect to be a higher rate tax payer in the future.  Should I open a LISA - stocks and shares/cash or both?

As LISAs have an age restriction of 40, then I must ask if there is anything else I should do before I am 40? I own a home.

RacingDriver

As you own a home a LISA would be for when you can withdraw without penalty age 60+, therefore you have an investment period of 20 years which is long enough to invest in S&S LISA rather than cash LISA.

As from this weekend you will no longer be able to open a LISA, if you are even remotely considering using one they I would get it opened ASAP with just a pound to keep your options open.

Albermarle

I am a lower rate tax payer, just.  I expect to be a higher rate tax payer in the future.  

Pension is normally better for a higher rate taxpayer, but no harm in contributing to a pension and a LISA at the same time .

Remember you can only claim higher rate tax relief on the higher rate tax that you pay . So if you will only just be in the 40% tax bracket , the amount of higher rate tax relief will not be very big.

w00519773

Thanks.  I have opened a stocks and shares LISA.  Is there any benefit of opening a cash LISA as well? For example, in the future at the beginning of a tax year I could decide the stock market/bonds/gilts etc are too risky and invest money in the cash LISA that year.  Is that even allowed? 

It would mean I would have to invest in both this year (minimum requirement to open them), so I guess the answer is no for me?

Albermarle

For example, in the future at the beginning of a tax year I could decide the stock market/bonds/gilts etc are too risky and invest money in the cash LISA that year.

Apart from the technicalities of opening two different LISA's ( not sure about that ) you are talking about trying to time and second guess the market each year. This is very difficult/impossible for even professional investors and is basically a waste of time . As I have found many times in the past . You are just as likely to be wrong as right .

Just stick your £4K in each year and don't overthink it .

grumiofoundation

w00519773 said:

Thanks.  I have opened a stocks and shares LISA.  Is there any benefit of opening a cash LISA as well? For example, in the future at the beginning of a tax year I could decide the stock market/bonds/gilts etc are too risky and invest money in the cash LISA that year.  Is that even allowed? 

It would mean I would have to invest in both this year (minimum requirement to open them), so I guess the answer is no for me?

You can only pay into one LISA a year so as you say that option is not available. 

And as said above wouldn’t be a great idea anyway (although for completeness you can attempt to time the market the way you suggest more easily with other accounts)