LISA - Partial Transfer Question

MisterMotivated

Hi all.  I'm hoping someone on here can clarify something as I can't find a definite answer anywhere; any insight would be greatly appreciated.  I currently have a stocks & shares LISA with AJ Bell, and am fast approaching my 40th birthday, therefore I'm considering opening a cash LISA so I have it available to me an option in future (particularly for when I approach 60 and want to reduce risk and still see at least a little growth).  I plan to keep a minimal amount in the account for now (maybe £100) while I continue with the S&S LISA as my main focus.  I'm aware I can't subscribe to both in the same tax year (no payments made yet for 2022-23), so I would have to put £4,000 into the cash LISA this year in order to make full use of my annual allowance.  My plan is to put £4,000 in before April 2023, then transfer ~£3,900+bonus/interest to AJ Bell once we're into the next tax year. 

So, my questions are: do providers (specifically AJ Bell) allow partial transfers of previous-year balances from one LISA to another, and will it affect the current year's allowance?  All FAQ's/searches/etc talk about transferring funds deposited in the same tax year (therefore must transfer the full amount), or partial transfers from regular ISA's (which obviously then counts towards LISA limit for that tax year).  I can't find anything to confirm whether I can pay £4,000 in this year, then transfer £3,900 next year and still deposit next year's £4,000 allowance.

ETA: To further complicate things, the AJ Bell site states "To transfer a Lifetime ISA to us, you need to be aged under 40." - does anyone know whether this is based on the assumption the individual doesn't already have a LISA with them, or if it relates to existing accounts as well?

I'm aware some people will want to respond with "Ask AJ Bell", and I will, though as it's a Sunday evening and I'm bored, I thought I'd ask on here in the hope of getting a quicker response.

masonic

What you are planning will potentially work, but both providers must be willing to support a partial transfer. It is probably a question for them as it is unusual to want to do as you propose. Is there any reason why you wouldn't want to switch to low risk investments in the S&S LISA?

MisterMotivated

Thanks for the reply.  Yes, I do plan on asking them and will hopefully get a quick response when they are open again.  I have fairly specific plans for a portion of the funds when I reach 60, so would like the option to move a set amount to a practically-no-risk account for a year or two.  I got out of my funds early this year when it seemed values had a lot further to drop (am slowly getting back in though prices are still below what I sold at), but the cash sitting there is earning no interest in the meantime.  Therefore I'd probably favour a year or two of low interest gains compared to an unexpected event potentially affecting even low risk investments.

masonic

MisterMotivated said:

Thanks for the reply.  Yes, I do plan on asking them and will hopefully get a quick response when they are open again.  I have fairly specific plans for a portion of the funds when I reach 60, so would like the option to move a set amount to a practically-no-risk account for a year or two.  I got out of my funds early this year when it seemed values had a lot further to drop (am slowly getting back in though prices are still below what I sold at), but the cash sitting there is earning no interest in the meantime.  Therefore I'd probably favour a year or two of low interest gains compared to an unexpected event potentially affecting even low risk investments.

There is no way of knowing whether this will be possible, nearly 20 years in the future. The only way to be certain of having a set amount in a cash LISA when you reach 60 is to pay it in or transfer it before you reach 50. After that point there will be no fall back plan if your chosen provider does not accept transfers.

Of more concern is that it seems you are attempting to time the market and avoid losses now, which is often counterproductive. Are you planning to sell up every time there is a downturn over the next 20+ years?

As an alternative option to your plan, AJ Bell allows direct investment in gilts, which would provide a risk free option with positive return, but you need to buy them by phoning their dealing services team (it is not uncommon not to be able to trade these online).

MisterMotivated

masonic said:

There is no way of knowing whether this will be possible, nearly 20 years in the future. The only way to be certain of having a set amount in a cash LISA when you reach 60 is to pay it in or transfer it before you reach 50. After that point there will be no fall back plan if your chosen provider does not accept transfers.

True, but there's no way of knowing whether LISAs will still exist at all in 20 years; having no cash LISA open before I turn 40 will guarantee that possibility is not there in future.  I'm just trying to keep my options open.  If things change in the future, I'll adapt my strategy accordingly.

masonic said:

The only way to be certain of having a set amount in a cash LISA when you reach 60 is to pay it in or transfer it before you reach 50. After that point there will be no fall back plan if your chosen provider does not accept transfers.

At that point, the fallback plan is to keep the required value (in whatever form) in the S&S LISA until it's needed instead.

masonic said:

Of more concern is that it seems you are attempting to time the market and avoid losses now, which is often counterproductive. Are you planning to sell up every time there is a downturn over the next 20+ years?

My investments sat happily for years without being touched.  However, I noticed a situation brewing that I believed carried a significant risk of losses and decided it would be prudent to move to a less risky asset class.  There's no law of investing that says I have to blindly stick with my chosen funds through thick and thin.

masonic

MisterMotivated said:

masonic said:

There is no way of knowing whether this will be possible, nearly 20 years in the future. The only way to be certain of having a set amount in a cash LISA when you reach 60 is to pay it in or transfer it before you reach 50. After that point there will be no fall back plan if your chosen provider does not accept transfers.

True, but there's no way of knowing whether LISAs will still exist at all in 20 years; having no cash LISA open before I turn 40 will guarantee that possibility is not there in future.  I'm just trying to keep my options open.  If things change in the future, I'll adapt my strategy accordingly.

If LISAs no longer exist then problem solved! I'm just highlighting that more options start to close off for you as you approach age 50. You have until then the opportunity to pay new cash into a cash LISA should your chosen cash LISA cease accepting transfers. If it ceases accepting transfers after then, you are out of options. In the same way you are planning ahead now to prevent you being unable to act later, you may wish to plan ahead then and complete the transfer at the point your alternative option to pay in new cash expires.

MisterMotivated said:

masonic said:

Of more concern is that it seems you are attempting to time the market and avoid losses now, which is often counterproductive. Are you planning to sell up every time there is a downturn over the next 20+ years?

My investments sat happily for years without being touched.  However, I noticed a situation brewing that I believed carried a significant risk of losses and decided it would be prudent to move to a less risky asset class.  There's no law of investing that says I have to blindly stick with my chosen funds through thick and thin.

You are free to do whatever you want. I'm merely pointing out that is it well founded that this sort of practice often results in the investor achieving a lower return than the investments they hold/held. A large proportion of retail investors fail to achieve the returns delivered by their investments due to trading in and out of them. However, that's very different to changing asset class in response to a misunderstanding about their risk or change in your risk tolerance. If you were invested in assets that were too risky for you, then it is sensible to correct this error and move forward with more appropriate assets for your objectives.

MisterMotivated

Apologies if my reply came across a bit hostile, I have a lot on my mind at the moment.  I appreciate the advice and I generally don't follow this approach, though I stand by my decision.  I may buy back in and hold the same investments until I retire, but if I see a situation unfold that, for example, has the potential to turn into WWIII / WW:Moscow Drift, then who knows, I may consider doing the same again.

Albermarle

To further complicate things, the AJ Bell site states "To transfer a Lifetime ISA to us, you need to be aged under 40." - does anyone know whether this is based on the assumption the individual doesn't already have a LISA with them, or if it relates to existing accounts as well?

Could be worth reading these threads.

Transferring a LISA - What options do I have please? — MoneySavingExpert Forum
Time for government to force LISA SS providers accept transfers in 40+?!! — MoneySavingExpert Forum

masonic

Albermarle said:

To further complicate things, the AJ Bell site states "To transfer a Lifetime ISA to us, you need to be aged under 40." - does anyone know whether this is based on the assumption the individual doesn't already have a LISA with them, or if it relates to existing accounts as well?

Could be worth reading these threads.

Transferring a LISA - What options do I have please? — MoneySavingExpert Forum
Time for government to force LISA SS providers accept transfers in 40+?!! — MoneySavingExpert Forum

My understanding is that it was the account opening part that was preventing them from progressing transfer applications. I am not aware of anyone over 40 attempting a transfer into an existing LISA held at AJ Bell. In the case of the OP, the transfer will be going in the other direction and I don't know if cash LISA providers that accept transfers have taken the same hard line about opening accounts for over 40s to receive a transfer. As you can see from the second thread, AJ Bell's problem is one of programming, and they are able to manually process an application with sufficient pressure to do so.

MisterMotivated

masonic said:

Albermarle said:

To further complicate things, the AJ Bell site states "To transfer a Lifetime ISA to us, you need to be aged under 40." - does anyone know whether this is based on the assumption the individual doesn't already have a LISA with them, or if it relates to existing accounts as well?

Could be worth reading these threads.

Transferring a LISA - What options do I have please? — MoneySavingExpert Forum
Time for government to force LISA SS providers accept transfers in 40+?!! — MoneySavingExpert Forum

My understanding is that it was the account opening part that was preventing them from progressing transfer applications. I am not aware of anyone over 40 attempting a transfer into an existing LISA held at AJ Bell. In the case of the OP, the transfer will be going in the other direction and I don't know if cash LISA providers that accept transfers have taken the same hard line about opening accounts for over 40s to receive a transfer. As you can see from the second thread, AJ Bell's problem is one of programming, and they are able to manually process an application with sufficient pressure to do so.

In my case, the transfers would ultimately be in both directions.  In about 18 years, I'd look to transfer from S&S to cash, but more immediately, I'd want to transfer from cash to S&S, so that I can open a cash LISA before my 40th birthday but still maximise ths year's allowance and move the majority of it to AJ Bell to invest until then

masonic

MisterMotivated said:

masonic said:

Albermarle said:

To further complicate things, the AJ Bell site states "To transfer a Lifetime ISA to us, you need to be aged under 40." - does anyone know whether this is based on the assumption the individual doesn't already have a LISA with them, or if it relates to existing accounts as well?

Could be worth reading these threads.

Transferring a LISA - What options do I have please? — MoneySavingExpert Forum
Time for government to force LISA SS providers accept transfers in 40+?!! — MoneySavingExpert Forum

My understanding is that it was the account opening part that was preventing them from progressing transfer applications. I am not aware of anyone over 40 attempting a transfer into an existing LISA held at AJ Bell. In the case of the OP, the transfer will be going in the other direction and I don't know if cash LISA providers that accept transfers have taken the same hard line about opening accounts for over 40s to receive a transfer. As you can see from the second thread, AJ Bell's problem is one of programming, and they are able to manually process an application with sufficient pressure to do so.

In my case, the transfers would ultimately be in both directions.  In about 18 years, I'd look to transfer from S&S to cash, but more immediately, I'd want to transfer from cash to S&S, so that I can open a cash LISA before my 40th birthday but still maximise ths year's allowance and move the majority of it to AJ Bell to invest until then

The issue is with the transfer that would take place after your 40th birthday. The one you plan to make before reaching 40 should not be subject to the issue of refusal due to not being eligible to open a LISA. This is an issue that is specific to a couple of S&S LISA providers, the only surviving one of these is AJ Bell. There have been no reports from over 40s of transfers to cash LISAs running into the same problems, although no reports of successes either. According to the MSE best buy table, all five cash LISAs listed accept transfers "at any age", so it seems likely no pre-existing account is needed.