We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

LISA - is there any point if I already have property?

Options
Rony
Rony Posts: 160 Forumite
First Anniversary First Post Name Dropper
edited 27 January 2023 at 1:22PM in ISAs & tax-free savings
Hi there,

I am just looking into LISAs as an investment vehicle rather than for first home as I already have one, and I just can't seem to see the benefits, or rather it pales in comparison to other investments. Please can someone see where I am missing something:

Say I have just £4k to invest.

If I put it into a LISA, I get 25% from Gov, so immediate it is £5k. Then + interest from the provider I am putting it with say 3%, over say 20 years will give me £8k at end of it.

If I were to put that £4k in the stock market (S&S ISA) that is say giving returns of 8% per year compound, by year 20 I would have £17k. (Yes I know there is risk, but on average 8% is common particularly over long periods of time)

So already right off the bat LISA is already very unattractive. To add to that, I cannot withdraw from the LISA until retirement without incurring penalty. So even putting my £4k in a current flexible account/Cash ISA at 3-5% is better? I don't get the gov bonus of £1k, but that's a small price to pay for flexibility until I retire?

Where am I going wrong?

Thanks

Comments

  • eskbanker
    eskbanker Posts: 32,015 Forumite
    First Anniversary Name Dropper Photogenic First Post
    Options
    You're going wrong by comparing a cash LISA with a S&S ISA!

    If you're looking to invest for the long term then you wouldn't use a cash LISA but would use the S&S version of the LISA, thereby benefitting from the 25% bonus as well as investment growth that should comfortably exceed cash returns over that timeframe.

    It is true that premature access to LISA money is penalised, so that's a valid differentiator, but for those happy to lock money away until they reach 60 (slightly longer than people do with pensions), the 25% bonus makes it hard to beat, as this is on top of the returns from the underlying investments.  Having said that, its effect is undoubtedly diluted over many years, but ultimately its free money!
  • Albermarle
    Albermarle Posts: 23,143 Forumite
    First Anniversary First Post Name Dropper
    Options
    There are only a handful of providers of Stocks & Shares LISA's, sometimes called Investment LISA's.

    There are four mentioned in this article + a lot of details about LISA's in general.
    Lifetime ISA (LISA): how they work & best buys - Money Saving Expert
  • Rony
    Rony Posts: 160 Forumite
    First Anniversary First Post Name Dropper
    Options
    Thank you, so I guess it's the S&S LISA I should be looking at.

    I already have a S&S ISA. I am not sure the additional 25% is enticing enough to open one and have it locked away til 60. Maybe I can open it anyways (have both S&S normal ISA and LISA) and have a small amount going into the S&S LISA each month....so it's sort of pensions pot #2
  • eskbanker
    eskbanker Posts: 32,015 Forumite
    First Anniversary Name Dropper Photogenic First Post
    Options
    Rony said:
    Thank you, so I guess it's the S&S LISA I should be looking at.

    I already have a S&S ISA. I am not sure the additional 25% is enticing enough to open one and have it locked away til 60. Maybe I can open it anyways (have both S&S normal ISA and LISA) and have a small amount going into the S&S LISA each month....so it's sort of pensions pot #2
    Yes, it's only possible to pay £4K per year into a S&S LISA anyway....
  • Albermarle
    Albermarle Posts: 23,143 Forumite
    First Anniversary First Post Name Dropper
    Options
    Rony said:
    Thank you, so I guess it's the S&S LISA I should be looking at.

    I already have a S&S ISA. I am not sure the additional 25% is enticing enough to open one and have it locked away til 60. Maybe I can open it anyways (have both S&S normal ISA and LISA) and have a small amount going into the S&S LISA each month....so it's sort of pensions pot #2
    If you scroll through the link I sent there is a list of pros and cons for Pension vs LISA, later in the article.
Meet your Ambassadors

Categories

  • All Categories
  • 344.8K Banking & Borrowing
  • 250.6K Reduce Debt & Boost Income
  • 450.4K Spending & Discounts
  • 236.9K Work, Benefits & Business
  • 610.8K Mortgages, Homes & Bills
  • 173.9K Life & Family
  • 249.7K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards