S and S Lisa

Hi,

I’m concidering opening up a S and S LISA to give me a nice lump sum of cash when I hit 60 To pay off my mortgage, have a nice holiday and if I have kids to help them out.

I’m early 30’s and have maxed out my workplace pension.

I’m looking to invest £50+ a month, increasing to £100 after a year.

Im a bit nieve when it comes to investments to I tend to stick to cash investments.

Question is, I’m not 100% sure how it works, so I pay in an amount each month, and that stays as cash until I invest it?
Or can I pay straight into an investment fund? Do I pay a fee each month transferring that investment into cash?

Was concidering AJ Bell is they seem to have the lowest fee’s

Thank you
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  • Alexland
    Alexland Posts: 9,653
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    edited 4 August 2018 at 9:32AM
    Jimmyc wrote: »
    I'm early 30's and have maxed out my workplace pension.

    What do you mean by that - that you are getting maximum employer matched contributions or you are putting enough in to avoid paying higher rate tax? Or maybe both? If you are still paying any higher rate tax then further pension contributions (assuming you haven't hit the pension annual allowance, etc) would beat a LISA.
    Jimmyc wrote: »
    so I pay in an amount each month, and that stays as cash until I invest it?
    Or can I pay straight into an investment fund? Do I pay a fee each month transferring that investment into cash?

    Depends on the provider; companies like Nutmeg, Share Centre and Moneybox will do all this for you automatically however my view is that DIY platforms such as HL and AJ Bell offer a better value and financial stability proposition for LISAs. It's more work as you add money and invest the contribution/bonuses manually and keep an eye on the cash balance to pay the periodic platform fees.

    The quality of service from both HL and AJ Bell are about the same (pretty average in my experience) so it is really just down to what they will cost you which depends on your contribution profile (regular or lump sum), account balance and investment choices.
    Jimmyc wrote: »
    Was concidering AJ Bell is they seem to have the lowest fee's

    Remember that AJ Bell charge £1.50 per fund trade so are expensive for your small amounts. You would probably be better with HL (as although their percentage platform fee is higher they have no fund trade fees) investing in something like their discounted Blackrock Consensus 85 which is a mostly passive global equities/bond fund. You won't find a mixed asset fund with such a low percentage charge on AJ Bell.

    https://www.hl.co.uk/investment-services/lifetime-isa

    https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/b/blackrock-consensus-85-class-i-accumulation

    Remember with stock market investments to expect the value to go up and down but the long term average over the past few hundred years has been up. Still there will be periods when you are down and you will have to sit tight and not make the behavioral error to sell low. I find this article helpful:

    https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

    As you get closer to withdrawal it is likely you will want to gradually move into a lower volatility fund to reduce the risk of being impacted if the stock markets are low if you want to withdraw at 60.

    Alex.
  • Jimmyc
    Jimmyc Posts: 171
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    edited 5 August 2018 at 10:29AM
    Thank you for your reply.

    Im maxing out employer contributions, I!m doing 5% they are matching with 10%.

    I dont expect to retire until 65+ and would like a lump some of money a few years before retirement, I would have ideally liked at 50/55 but if I choice a LISA then I get the 25% bonus.

    That was my concern, I know £50 is low and didnt want it been chipped away by fees

    I will look into the option from HL as that makes more sense.

    The link to nutmeg was quite interesting and a good read. Ive had sharesaves before but never really invested in anything else.
  • Alexland
    Alexland Posts: 9,653
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    If you are still paying any higher rate tax then it's worth considering increasing your employee contribution above 5% (even if you get no further employer matching) in preference to a LISA.

    Also for someone in basic rate whose employer enables salary sacrifice NI savings then additional pension contributions give roughly similar benefit to a LISA.

    Good luck
    Alex
  • Jimmyc
    Jimmyc Posts: 171
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    I!!!8217;m a basic tax payer and expect to be for a while.

    I know nobody can give me an answer to where to invest, but is there any guide to where to put my ongoing investment? I didn!!!8217;t realise there would be that many funds? How do people make there decision? My decision would be a complete punt !!!55358;!!!56614;!!!8205;!!!9794;!!!65039;
  • Alexland
    Alexland Posts: 9,653
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    In which case you would be best going for something fairly passive like the Blackrock Consensus 85 that I suggested above. Such a fund should capture most of the market returns at a low cost.

    People make their decisions based on advertising, research, word of mouth and talking about it endlessly on internet forums...

    Alex
  • Jimmyc
    Jimmyc Posts: 171
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    Thank you for your reply.

    Am I best putting the whole fund into the one account or is it best to split over 2? I know £50 a month is a very small amount, but will be £100/£150 in a year once I!!!8217;ve moved and got a few things sorted
  • Alexland
    Alexland Posts: 9,653
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    You are only allowed to contribute to one LISA account in each tax year. You get FSCS protection up to £50k but that's going up to £85k from next tax year. Obviously the protection doesn't cover the investments going up and down. 1 well diversified fund choice should be fine for low amounts.

    Alex
  • Jimmyc
    Jimmyc Posts: 171
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    I probably worded my last question wrong, I meant fund not account. Will stick with HL but wasnt sure if its worth splitting over 2 funds to minimise risk but think youve answered that.
    Thanks again, account opened and funded.
  • Jimmyc
    Jimmyc Posts: 171
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    due to reevaluating all my outgoings and a small pay rise I’m now in a position to save around £200 per month (£300 after Xmas)
    So similar question again all in the one fund or split? I wouldn’t mind maybe going a bit higher risk with quarter or half, maybe one that pays monthly dividends instead off 6 monthly.
  • Linton
    Linton Posts: 17,062
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    Jimmyc wrote: »
    due to reevaluating all my outgoings and a small pay rise I’m now in a position to save around £200 per month (£300 after Xmas)
    So similar question again all in the one fund or split? I wouldn’t mind maybe going a bit higher risk with quarter or half, maybe one that pays monthly dividends instead off 6 monthly.


    One broadly based fund like the Blackrock one mentioned previously is fine when you only have a very small portfolio. Once you get to say £20K you may want to look at additional funds.


    Though whilst you are dealing with non life-changing amounts of money there is nothing wrong with gaining experience by investing a % in additional different funds.
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