S and S Lisa

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Comments

  • TheLastMongoose
    TheLastMongoose Posts: 96 Forumite
    First Anniversary First Post
    Jimmyc wrote: »
    maybe one that pays monthly dividends instead off 6 monthly.


    This would be more relevant to somebody who is going to be withdrawing the income, for example, somebody retired who is living off their investments.

    At your stage in life most people simply use their investment income to buy more investments so the frequency of the dividends doesn't really matter. For this reason most people choose accumulation funds rather than income funds. If you haven't heard of income and accumulation units you should read about the difference before you buy any investments.
  • ColdIron
    ColdIron Posts: 9,012 Forumite
    First Anniversary Name Dropper Photogenic First Post
    Jimmyc wrote: »
    maybe one that pays monthly dividends instead off 6 monthly.
    What do you hope to achieve by this?

    At your age you are looking for growth or total return not income and frequent income doesn't advantage you in any way that I can think of
  • Jimmyc
    Jimmyc Posts: 171 Forumite
    First Post First Anniversary Combo Breaker
    Thank you for your reply’s sorry it’s taken so long to respond, I’ve read what I wrote and I missed half the information and didn’t explain my aim.
    I have about 8k at the minute in premium bonds (£100 winnings in past 6 months, years ago when rates were higher I usually out performed savings)
    I have a similar amount in my isa although I’m about to spend part of it.
    There is nothing for the forseeable future I will spend that on.
    The LISA plan is for retirement 60/65 whenever what may be.
    I generally put 100-200 in my isa each month, I don’t know how long I will be able to commit that amount for.

    My delema is do I leave my money in my isa earning below inflation, leave my premium bonds getting me the odd £25 every other month or move both or just the isa into stocks and shares, my gut tells me move the cash isa over to start with.

    I’ve already openned a stocks and shares but haven’t done anything, do I invest in the same fund as my LISA?

    I’ve thought about taking a chunk of my mortgage but my rate is 1.95% fixed for 5, hoping my investment would be better then paying off a chunk.

    Seems not a bad time to make the decision due to what happened in the market last week.

    I guess monthly dividends was because I was thinking long term but I guess it’s not important whilst fund would be low.

    Thank you again
  • Alexland
    Alexland Posts: 9,653 Forumite
    First Anniversary Photogenic Name Dropper First Post
    Make your decisions in sequence.

    Hold enough in accessable emergency cash to cover any period in which your normal income may be unavailable or your expenditure may be higher than normal (or both) this is a judgement on your outgoings, employability, etc.

    Hold cash for any expenditure planned in the next 5 years which you do not plan to fund from future income.

    Then for the rest of your money determine what may be needed in the medium/long term (S&S ISA) and what can be put away for retirement (LISA and pensions).

    Only once you have made these allocations then start to decide what providers and funds to use.

    Alex
  • Jimmyc
    Jimmyc Posts: 171 Forumite
    First Post First Anniversary Combo Breaker
    A year on from opening my accounts, 2.5k later return is looking good.
    Starting to up my monthly investments now and have split between LISA S&S and S&S, think I might have made a mistake and should have only used a LISA, I don’t intend to use this money any money for the foreseeable future, I have an emergency fund in an easy access account.

    I was initially thinking I don’t want to be hit with the 25% charge if I withdraw money in 10 years or so but have realised if I withdraw from a Lisa S&S after 5 years I would be better off even with the 25% charge.

    Example
    Investment £1000
    Bonus £250
    New total £1250

    Average growth 6%
    For the purpose of the example I’m ignoring growth on the £1000 investment as that will be the same regardless of Lisa or not.
    After 5 years 1334.
    25% charge for withdrawing £333.50
    £1000.50 remaining

    So I’m right in thinking because I don’t want to access the money for at least 10 years I should have put it all in the Lisa regardless of if I want the money at 45,55 or 60.
  • Alistair31
    Alistair31 Posts: 945 Forumite
    First Anniversary First Post Name Dropper
    LISA
    1000 > 1250
    1250 invested 10yrs with 6% compounded year on year
    = 2274
    -25% penalty = 1706

    ISA
    1000 invested 10yrs with 6% compounded year on year
    = 1819

    Don’t use the LISA if you’re not going to use it for property purchase or if you can’t wait until 60.

    You’ve a lot of reading to do I think.
  • gang_aft_agley
    gang_aft_agley Posts: 1 Newbie
    Jimmyc wrote: »
    I was initially thinking I don’t want to be hit with the 25% charge if I withdraw money in 10 years or so but have realised if I withdraw from a Lisa S&S after 5 years I would be better off even with the 25% charge.
    You are mistaken. If you end up paying the 25% charge, you'd have been better off using a regular S&S ISA, not a S&S LISA, regardless of how long before you make the withdrawal which incurs the charge.
    Example
    Investment £1000
    Bonus £250
    New total £1250

    Average growth 6%
    For the purpose of the example I’m ignoring growth on the £1000 investment as that will be the same regardless of Lisa or not.
    After 5 years 1334.
    25% charge for withdrawing £333.50
    £1000.50 remaining
    As I read it, your scenario is to wait until compound return has multiplied your investment by about 1.334, and then withdraw your original £1000 (net of any applicable 25% charge), thus leaving the growth inside LISA.

    So you end up with £1000 in your wallet and £334 inside the S&S LISA (which there would be a further 25% charge on if you wanted to get it into your wallet, too).

    What if you'd used a S&S ISA instead? Then you'd have £1334 in the S&S ISA. So you could withdraw £1000 into your wallet, and still have £334 inside the S&S ISA. And £334 in a S&S ISA is worth more than £334 in a S&S LISA, because you could take the £334 out of the S&S ISA at any time without paying a 25% charge. So using a S&S ISA is better than using a S&S LISA in this scenario.

    It's better, but it's not the best method. Even better is to split your original £1000 between a S&S ISA and a S&S LISA, putting £750 into the former and £250 into the latter. A bonus of £62.50 is added to the LISA. When compound returns have multiplied those number by 1.334, you will have £1000 in the S&S ISA (which you can withdraw to your wallet with no penalty), and £416.87 in the S&S LISA.

    In general, if you may want access to some of your capital before you're 60, but not to all of it, you should split it between S&S ISA (for the part you will want to access) and S&S LISA (for the part you won't).
  • Jimmyc
    Jimmyc Posts: 171 Forumite
    First Post First Anniversary Combo Breaker
    I realise the mistake on my calculations, I calculated on the charge on the amount I put in not withdrew.
    My error thank you both for your reply’s
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