Advice on LISA and other savings

Martin_o03

Hello all, 

I'm looking for some advice on what to do with my savings, mainly my LISA.

I'm 34 and opened it following some inheritance I received a few years back. I have 10k sitting in it. I opened it to take advantage of the 1k bonus and with the expectation of buying a house within the next 10 years. At the moment I'm happy renting and my current lifestyle it suits me, I don't want to be tied down to a mortgage. Also, my credit isn't great so I doubt I would be able to get a decent mortgage until things clear up in about 5/6 years. I also may travel with work in the future so it could even be near 10 years.

Is it worth having that money sat in the LISA for the next 5/6 years and adding the maximum to it when I'm likely not going to be buying a house in the next 5 to 6 years?

I was considering a Stocks and Shares LISA given that I would have time to ride out the market but I'm not greatly experienced in stocks and it worries me slightly. Also I'm told that once you change it to a stocks and shares account you can never change it back to just a LISA.

I know that the LISA can also be used as a pension but this isn't the best option? I do have a good lifetime pension with my work also.

So looking for advice on the LISA situation. Also I have another 12k in a Yorkshire Bank rainy day limited access account which pays around 4.6% interest. Are there any better options out there that anyone would recommend? 

masonic

I don't know where you heard you cannot transfer from S&S LISA to cash LISA, but it isn't true.

An investment period of 5-6 years is still a bit short to be confident of a good return from investing in a S&S LISA. Though if you ultimately keep it until retirement (whether you add to it or not) then it would be much more worthwhile. You could also consider very low risk investments, such as a money market fund, which may beat the cash rates available. Dodl (AJ Bell) apparently pays quite a decent rate on cash itself in their S&S LISA, though that could change.

The alternative to keeping the money in your LISA is to withdraw it and take the net 6.25% penalty. Even though you may be able to get better rates outside the LISA, it would take a few years to breakeven.

Kaizen917

The money is already in and, as already mentioned, the 6.25% penalty doesnt make it worthwhile to withdraw. Im also with a LISA and was saying to myself that I could use it any time soon but in practice, not only it hasnt happened but I couldnt predict the precise year when that will be. With that in mind, the S&S version seems somewhat more attractive.

On the bright side, so far I havent come across a place where I could have placed this funds in that would have done significantly better (comparing it to my regular S&S ISA or savings). The 1k a year bonus is just pretty substantial. The only way I can imagine its being wasted inside the LISA is for people that are super enterpreneural and could have make a killing with it in short space of time (but thats not me and this carries its own risks).

If you feel like your LISA is headed towards being a pension and thats not a priority, then I guess you could hold off contributing further.