Switching between types of ISA, LISA and between providers

LL_USS

Good morning!
I joined MSE forum recently and have learned much about pension; really appreciate people's help. I also realise that I don't do anything with S&S (stocks and shares) yet.
Since finishing sorting out other money matters, I have only put in 2 years' ISAs, both cash, which I merged together in November 2023 to a one year fixed cash ISA with an okay rate.

I also have a few years' worth of Lifetime ISAs as another safety net for retirement, which I have not topped up in a while. Also cash type.

I will still need ready cash in the next few years so I am okay to keep my ISAs as cash type. But with LISAs I won't be able to access this pot till I turn 60, so it is better to have S&S LISA, right?

I thus have two questions if anyone could help please:

(1) when is the best time to switch a provider for a good rate for ISA or LISA (before or after 6 April or any other time?)? My LISA  bonus rate (0.75%) with Money box is going to expire at the end of this month. After that the rate will be 3.5%. The ISAs rate still okay, but I should look around at some stage near the end of the fixed period.

(2) can I switch a cash LISA to S&S LISA? (I don't want to put more money in LISA to open a new S&S one so it is just about switching what I already have). 

Thank you!

eskbanker

There's no particularly good or bad time to switch providers - there used to be a flurry of activity for cash ISAs around the end of the tax year but that's largely a thing of the past.

And the LISA rules do allow you to move between cash and S&S variants, but you'd need to check with your target S&S LISA provider if they support that, as product-specific conditions may differ.

Albermarle

I will still need ready cash in the next few years so I am okay to keep my ISAs as cash type. But with LISAs I won't be able to access this pot till I turn 60, so it is better to have S&S LISA, right?

Correct, over a long period you would expect a S&S LISA to outperform a cash Lisa.

You will have to pick investments for the S&S LISA, depending on the provider some will have more choice than others ( which can be a good or bad thing )

LL_USS

Albermarle said:

I will still need ready cash in the next few years so I am okay to keep my ISAs as cash type. But with LISAs I won't be able to access this pot till I turn 60, so it is better to have S&S LISA, right?

Correct, over a long period you would expect a S&S LISA to outperform a cash Lisa.

You will have to pick investments for the S&S LISA, depending on the provider some will have more choice than others ( which can be a good or bad thing )

Thank you Albermarle. You are right. I am quite anxious about choosing funds though so still not sure about the S&S option for LISA yet. I need to look around more to see how to choose fund first before finding a provider who accepts transfer. 

LL_USS

eskbanker said:

There's no particularly good or bad time to switch providers - there used to be a flurry of activity for cash ISAs around the end of the tax year but that's largely a thing of the past.

And the LISA rules do allow you to move between cash and S&S variants, but you'd need to check with your target S&S LISA provider if they support that, as product-specific conditions may differ.

Thank you eskbanker. It is uncertain when is the best time then. I thought I would ask, after waiting and waiting and fixing my energy tariffs with a new provider and bam all the new cheaper ones arrived ;-)

LL_USS

Albermarle said:

I will still need ready cash in the next few years so I am okay to keep my ISAs as cash type. But with LISAs I won't be able to access this pot till I turn 60, so it is better to have S&S LISA, right?

Correct, over a long period you would expect a S&S LISA to outperform a cash Lisa.

You will have to pick investments for the S&S LISA, depending on the provider some will have more choice than others ( which can be a good or bad thing )

Sorry I forgot to ask if we choose a LISA provider to register for a transfer from a cash LISA to S&S LISA with them first, then choose the fund after? That is the process right? Thank you.

badger09

LL_USS said:

Albermarle said:

I will still need ready cash in the next few years so I am okay to keep my ISAs as cash type. But with LISAs I won't be able to access this pot till I turn 60, so it is better to have S&S LISA, right?

Correct, over a long period you would expect a S&S LISA to outperform a cash Lisa.

You will have to pick investments for the S&S LISA, depending on the provider some will have more choice than others ( which can be a good or bad thing )

Sorry I forgot to ask if we choose a LISA provider to register for a transfer from a cash LISA to S&S LISA with them first, then choose the fund after? That is the process right? Thank you.

Yes
Open your new S&S ISA & complete that provider’s xfer process. 

Once your Cash ISA has been transferred, you choose the fund you want to invest in. 

Makes sense to decide on the fund first then check that your chosen provider offers it. Not all providers offer every fund. For example, the Vanguard platform offers only Vanguard funds   

LL_USS

badger09 said:

LL_USS said:

Yes
Open your new S&S ISA & complete that provider’s xfer process. 

Once your Cash ISA has been transferred, you choose the fund you want to invest in. 

Makes sense to decide on the fund first then check that your chosen provider offers it. Not all providers offer every fund. For example, the Vanguard platform offers only Vanguard funds   

THank you so much badger09. You're a star! I will do accordingly.

Best wishes

LL

LL_USS

@badger09 @Albermarle @eskbanker
Good morning, if you are still around may I ask you again about ISA/LISA issues.

I have decided that I will sell my main house when helping kids buy in the next couple of years, thus no longer need my ISAs in cash form waiting for that plan. After reading around, back and forth with the idea of S&S or not, I am thinking it's good to learn a new skill, so I am back to the route of finding ways to invest, although I am still nervous and lack of confidence.

I combined a couple of years' ISAs into one with a provider with a fixed rate till the end of this November (each year I only have max 16K into ISA because I put the remaining 4K in a LISA). If I wanted to transfer to another fixed rate cash account, I would need to do asap before the base rate falls further and all good fixed deals disappears. But if I transfered any money out before the date, it would be 2 months' interest penalty. A bit of a dilemma. I am thinking perhaps I need to wait to after the fixed rate period, before opening a new S&S ISA, make sure checking in advance if that provider accepts transfers in and has the investment options I am happy with, then proceed (thank you for your advice above, regarding this process).

My question now is when to open a new S&S one, within this financial year (for e.g. in December 2024) for avoiding rate drops, or wait till the next (6 April 2025) for simplicity. My fixed rate one was opened for the last financial year (up to 5 April 2024). I then opened another cash ISA, flexible type, variable rate, for the current financial year (up to 5 Apr 2025). My vague understanding of the new ISA rules is we can open multiple ISAs in a year as long as we have to transfer all exisiting ones in the new one and the total new money put in in a year does not go over the annual allowance (20K for both LISA and ISA).

If you could help sheding some light it would be great. Thank you

LL_USS

@cloud_dog

I have no idea how but since I talked to you, my projected Defined Benefit has increased from 16k/year to 25.6K at retirement (I think perhaps it's because USS reversed the rule of putting anything over 40K salary to investment pot rather than DB after April 2024). My numbers for pension add up now. I still keeping on moving anything over the threshold to higher tax rate to volunteer contribution to pension.

Thanks for your advice regarding how LISA can work out better for basic tax rate people - I am maxing that out again. 

I am thinking I may have a bit of saving left after my LISA, ISA (which I am going to turn into S&S) and volunteer pension contribution, then I will open LISA for my older child too. I am trying to learn about S&S to have a bit more confidence in doing this. My sister was stung by some stock crashing in another country (though she works in finance) - so I am still quite nervous about it. When I start I will chose less risky options I suppose. I have heard  some bigger fund are safer choices over the long term. Any advice?

eskbanker

LL_USS said:

My question now is when to open a new S&S one, within this financial year (for e.g. in December 2024) for avoiding rate drops, or wait till the next (6 April 2025) for simplicity. My fixed rate one was opened for the last financial year (up to 5 April 2024). I then opened another cash ISA, flexible type, variable rate, for the current financial year (up to 5 Apr 2025). My vague understanding of the new ISA rules is we can open multiple ISAs in a year as long as we have to transfer all exisiting ones in the new one and the total new money put in in a year does not go over the annual allowance (20K for both LISA and ISA).

Not sure what you mean by 'avoiding rate drops' in the context of opening a S&S ISA, but your understanding of the ISA rules is effectively out of date - there is indeed a rule that total contributions (of new money) must be no more than £20K in aggregate, but this can now be spread across as many ISAs as you wish.