Lifetime ISA question

cardboardkettle

I currently have a Lifetime ISA which I have been using to save for a house. However, I would also like a Lifetime ISA to save £4000 into each year to build up a pot of cash for age 60, so I was going to open a second Lifetime ISA before the age of 40 and save into that after I have enough money for a house.

It's just dawned on me though that having two Lifetime ISAs may be unnecessary. If I use a Lifetime ISA to buy a house, does it automatically close and I have to have a new Lifetime ISA, or does the Lifetime ISA just stay open? So suppose I use £25000 from a Lifetime ISA to buy a house, does the account remain open and I can continue investing into it after the age of 40?

WillPS

When you use the one LISA to purchase a home, just instruct your solicitors to leave a token balance. Then the same account be used to top up for retirement savings, if you wish.

masonic

A S&S LISA is better suited to retirement, whereas a cash LISA is more suited to buying a first property after a short period of saving. Therefore it would make sense to start a second or transfer the first after buying. It is somewhat difficult to transfer a LISA after reaching the age of 40 due to checks built in to the application form to screen people out based on DOB.

You can continue adding money to a LISA until the age of 50.

cardboardkettle

WillPS said:

When you use the one LISA to purchase a home, just instruct your solicitors to leave a token balance. Then the same account be used to top up for retirement savings, if you wish.

So in that case, if I left say £100-200 in the LISA (or whatever the solicitor suggests), the account stays open and I just continue paying in? Thanks for confirmation.

cardboardkettle

masonic said:

A S&S LISA is better suited to retirement, whereas a cash LISA is more suited to buying a first property after a short period of saving. Therefore it would make sense to start a second or transfer the first after buying. It is somewhat difficult to transfer a LISA after reaching the age of 40 due to checks built in to the application form to screen people out based on DOB.

You can continue adding money to a LISA until the age of 50.

Are they mutually exclusive? I have a LISA with Hargreaves Lansdown which lets me invest in various stocks, but I don't believe there's anything to stop me from simply putting in money and leaving it as cash. Does that not mean it fulfills both functions?

masonic

cardboardkettle said:

masonic said:

A S&S LISA is better suited to retirement, whereas a cash LISA is more suited to buying a first property after a short period of saving. Therefore it would make sense to start a second or transfer the first after buying. It is somewhat difficult to transfer a LISA after reaching the age of 40 due to checks built in to the application form to screen people out based on DOB.

You can continue adding money to a LISA until the age of 50.

Are they mutually exclusive? I have a LISA with Hargreaves Lansdown which lets me invest in various stocks, but I don't believe there's anything to stop me from simply putting in money and leaving it as cash. Does that not mean it fulfills both functions?

Do these interest rates look attractive to you: https://www.hl.co.uk/charges-and-interest-rates

You'd be better off with a money market fund, like CSH2. Then you could get the best of both worlds in one account. Sell it when it is time to buy your home and make sure the solicitor withdraws the cash balance and leaves your other shares alone.

cardboardkettle

@masonicAt the moment, I have everything in stocks and shares as I am not planning on buying a house in the near future. It's more risky that way, but I also have a help to buy ISA that is maxed out as a backup. 

A money market fund seems to be a sensible alternative as it means my money will grow without any risk of going down, so I can have a look at that.

But good to know that I only need one LISA and I can continue investing in the same LISA even after I have purchased a house, so that was the most important thing.

masonic

cardboardkettle said:

@masonicAt the moment, I have everything in stocks and shares as I am not planning on buying a house in the near future. It's more risky that way, but I also have a help to buy ISA that is maxed out as a backup. 

A money market fund seems to be a sensible alternative as it means my money will grow without any risk of going down, so I can have a look at that.

But good to know that I only need one LISA and I can continue investing in the same LISA even after I have purchased a house, so that was the most important thing.

Sorry, I got from your opening post that you currently had a Lifetime ISA, which you had been using to save for a house. So does this mean you have always been investing in the LISA without a definite plan to buy a house? If this is the case then continuing that may be suitable as long as you are willing to delay buying should the worst happen in the stockmarket at the wrong time for you. You can de-risk as your house buying plans begin to crystallise.

The HTB ISA would then seem to be a bit questionable. If you don't use it in the next ~6 years, then it will become a normal cash ISA. If you do use it, then you will have to comply with the more restrictive rules of that scheme, and you'll be limited to £3k bonus. Unless you are getting a really good interest rate on the money, then a case could be made for moving that into a S&S ISA and committing to use the LISA when the time eventually comes to buy. Putting whatever you think is appropriate into a money market fund to hedge the risk. This depends on whether you have other savings as the usual guidelines about keeping an emergency fund apply.

wjr4

Why are you not using a pension to save for retirement? 

cardboardkettle

masonic said:

cardboardkettle said:

@masonicAt the moment, I have everything in stocks and shares as I am not planning on buying a house in the near future. It's more risky that way, but I also have a help to buy ISA that is maxed out as a backup. 

A money market fund seems to be a sensible alternative as it means my money will grow without any risk of going down, so I can have a look at that.

But good to know that I only need one LISA and I can continue investing in the same LISA even after I have purchased a house, so that was the most important thing.

Sorry, I got from your opening post that you currently had a Lifetime ISA, which you had been using to save for a house. So does this mean you have always been investing in the LISA without a definite plan to buy a house? If this is the case then continuing that may be suitable as long as you are willing to delay buying should the worst happen in the stockmarket at the wrong time for you. You can de-risk as your house buying plans begin to crystallise.

The HTB ISA would then seem to be a bit questionable. If you don't use it in the next ~6 years, then it will become a normal cash ISA. If you do use it, then you will have to comply with the more restrictive rules of that scheme, and you'll be limited to £3k bonus. Unless you are getting a really good interest rate on the money, then a case could be made for moving that into a S&S ISA and committing to use the LISA when the time eventually comes to buy. Putting whatever you think is appropriate into a money market fund to hedge the risk. This depends on whether you have other savings as the usual guidelines about keeping an emergency fund apply.

I do have a Lifetime ISA which I am using to save for a house, but I would also like to use the same Lifetime ISA to save money until I am 50, which I will be able to withdraw at 60. The money in the Lifetime ISA is currently in stocks in shares as I was hoping it would grow a bit over the next 5 years or so, but indeed there are no definite plans to buy a house just yet. The Help to Buy ISA is a backup plan because I already had it for a few years before I opened the Lifetime ISA, and I guess I am concerned that something could go wrong with the Lifetime ISA. I am aware though that only one or the other can actually be used for a house.

I am not so worried about the Help to Buy ISA ultimately just becoming a cash ISA as financial advice anyway would be to have a smallish pot of liquid cash. It could also provide a cash fund for putting into my home when I do buy. But yes, if I find it becomes excess money then I would intend to put that into stocks and shares ISA.

cardboardkettle

wjr4 said:

Why are you not using a pension to save for retirement? 

I am. I have increased my pension contributions recently after understanding just how strong pension contributions are, and I will increase them further in the near future so the pension becomes my largest investment. I guess I am just diversifying; so I have a stocks and shares ISA, lifetime ISA, help to buy ISA as backup, and the pension.