LISA for an over 40

CompulsiveSaver

Hi, I was one of those who was under 40 when LISAs were released (so opened one with the princely sum of £1.00 while I had the opportunity), but time passed and now over 40!

When they started very few were competitive, most did not allow transfers above the age of 40 etc.

Hence, who is providing the best LISA rate that will allow a transfer in above the age of 40?

Also, as I have used my £20K ISA allowance is cash ISA, so it needs to be a transfer in, does that mean I am limited to £4K a few transfer in?

Thanks in advance?

masonic

Are you saying you didn't top up beyond the initial £1 you put in to open a LISA?

You could try https://www.getnude.com/lisa although I don't know their policy on over 40s. You would be able to transfer in the full balance of your current LISA.

It would also be worth considering whether a LISA is right for you. If using towards a home as a first time buyer, then this could be a good option, but if using for retirement, the erosion of value due to inflation would make a cash LISA a poor choice.

Tonski

masonic said:

 If using towards a home as a first time buyer, then this could be a good option, but if using for retirement, the erosion of value due to inflation would make a cash LISA a poor choice.

Why does inflation make a cash LISA a poor choice? If you get a 25% bonus and interest on top of that, is this not significantly higher than inflation?

Alexland

CompulsiveSaver said:

Hi, I was one of those who was under 40 when LISAs were released (so opened one with the princely sum of £1.00 while I had the opportunity), but time passed and now over 40!

Are you saving up as a first time buyer to buy a qualifying property or to withdraw from age 60?

Tonski said:

Why does inflation make a cash LISA a poor choice? If you get a 25% bonus and interest on top of that, is this not significantly higher than inflation?

There are 2 types of LISA - Cash or S&S.

Cash LISAs will have an interest rate generally below inflation so your spending power is erroded each year by a few percent. The 25% helps make up for that but as it's a one off bonus on each contribution if the errosion was to continue each year until age 60 then you would likely still end up with less spending power than you started with.

S&S LISAs are more sutied to contributing towards age 60+ withdrawal as they let you invest in volatile assets which are more likely to keep up with or exceed inflation over the long term so your spending power will be growing and you can buy more in future than you can today.

So generally speaking Cash LISAs are suitable for people buying property soon and S&S LISAs are for people who will withdraw from age 60+. It would have reduced confusion and poor choices if the government had labeled them "First Time Buyer LISA" and "Retirement LISA" although there's nothing to say you have to use the money at age 60 on retirement you might gift it to kids etc.

VNX

Although 25% bonus sounds good my understanding is this is only up to 50 so from 50 to 60 you just get ten years of poor interest and no bonus 

VNX

Can you move a cash LISA to a S and S LISA?

CompulsiveSaver

masonic said:

Are you saying you didn't top up beyond the initial £1 you put in to open a LISA?

Yes, that is correct. I have always used ISAs, but the LISA was just poor rates, as I was moving frequently earlier in my career, buying a house was a bad idea. I also have a HTB ISA but the rates have always been approximately the same as typical Cash ISA rates.

LISA however, have been quite poor, so I just opened up a LISA with a minimal amount before I hit 40 (which then allowed meant I was allowed to add more over 40 )  However, at the time most would not accept transfers above the age of 40.

Alexland said:

CompulsiveSaver said:

Hi, I was one of those who was under 40 when LISAs were released (so opened one with the princely sum of £1.00 while I had the opportunity), but time passed and now over 40!

Are you saving up as a first time buyer to buy a qualifying property or to withdraw from age 60?

Yes, the intention is to use it for a house purchase. I think long term savings in a LISA may be a poor plan, even the rate differential between a LISA and Cash ISA, not to mention the significantly lower annual contribution, means the benefit will be eroded over time, so not something I would advise. However, the uplift may make more sense when buying than HTB ISAs, so I am looking for the best LISA rate for cash that would allow a transfer-in from an existing Cash ISA.

Alexland

VNX said:

Although 25% bonus sounds good my understanding is this is only up to 50 so from 50 to 60 you just get ten years of poor interest and no bonus 

Yes you only get the bonus on the amount contributed each year and you can only contribute until age 50 so the decade between 50 to 60 it's just like a normal Cash (if you chose poorly) or S&S (if you chose wisely) ISA account but with early access penalties. On the plus side all the bonuses recieved are invested for that decade compounding returns.

I'm privately hoping that some government of the future will just give up on LISAs after I turn 50 and convert them into normal Cash ISAs or S&S ISAs which would allow me to transfer mine into my normal S&S ISA account without incuring the early access penalty as combining them would give me cheaper platform fees.

Even keeping a keen eye on costs running an extra S&S account for around 20-30 years is roughly costing me the first year's £1k bonus (plus investment growth on that bonus) in duplicate platform fees circa £50 pa once the account got big enough for capping to apply a few years ago.

VNX said:

Can you move a cash LISA to a S and S LISA?

Yes if the gaining provider will accept inbound LISA transfers and you as a customer.

masonic

VNX said:

Although 25% bonus sounds good my understanding is this is only up to 50 so from 50 to 60 you just get ten years of poor interest and no bonus 

It's worse than that as Alex points out above. It's a one-off bonus, so needs to be spread over the time the contribution spends in the LISA. For example, if you started contributing at age 30 and stopped at age 49, the average contribution would be in the account for 20 years before it could be (re)moved, so the 25% bonus averages out at just 1.1% per year.

VNX said:

Can you move a cash LISA to a S and S LISA?

In theory yes, but in practice someone over the age of 40 will have issues due to systems limitations of most S&S LISA providers, whereby they will not accept any application at all from someone over the age of 40.

masonic

CompulsiveSaver said:

Yes, the intention is to use it for a house purchase. I think long term savings in a LISA may be a poor plan, even the rate differential between a LISA and Cash ISA, not to mention the significantly lower annual contribution, means the benefit will be eroded over time, so not something I would advise. However, the uplift may make more sense when buying than HTB ISAs, so I am looking for the best LISA rate for cash that would allow a transfer-in from an existing Cash ISA.

I believe there are one or two options for someone over 40 within the cash LISA market. https://www.moneysavingexpert.com/savings/lifetime-isas/#bestbuys has a list, of which I believe Nutmeg can be ruled out, but the others I don't know about.

Alexland

CompulsiveSaver said:

Yes, the intention is to use it for a house purchase. I think long term savings in a LISA may be a poor plan, even the rate differential between a LISA and Cash ISA, not to mention the significantly lower annual contribution, means the benefit will be eroded over time, so not something I would advise. However, the uplift may make more sense when buying than HTB ISAs, so I am looking for the best LISA rate for cash that would allow a transfer-in from an existing Cash ISA.

I'm using my S&S LISA for age 60+ so don't keep an eye on the Cash LISA market but you could start by asking the top providers in the MSE Cash LISA best buy table if they will take you over 40? If not you might need to build your own sorted list of the next best interest rate providers.

https://www.moneysavingexpert.com/savings/lifetime-isas/

The other consideration if using a Cash LISA for buying a first time proeprty is the £450k price limit has not been increased for house price inflation since launch so be careful if the purchase is too far away as property prices might start creeping up again and you might find the limit doesn't enable you to buy the property you want in which case the withdrawal pentaly means you get back 6.25% less than you contributed. Lots of people eventually found the property price cap of £250k outside of London a problem with HTB ISAs but thankfully they were able to withdraw from that product without suffering a penalty.