Would a Life Time ISA be a good idea for me?

[Thin White Duke]

My monthly saver is about to come to an end and I'd like somewhere decent to park the cash.

I'm not as financially savvy as some on here and would welcome a little advice.

I'm more of a low risk kind of guy, regular savings, premium bonds etc...

For a low risk option I've been looking at opening a cash LISA. Currently have never owned a home of my own so it could go towards that in the future or save up and claim it at 60. The 25% bonus from the government sounds great. I believe you can only pay in until you're 50, so for me that would be 13 years. I'd hope to pay in the 4k per year or at least somewhere near that.

A slight downside are the low interest rates currently on offer (but this is true of most regular savings anyhow).

I might, just might think about a S&S ISA (separate to my LISA) but would really have to do my homework before committing to something with risk.

[95JO]

S&S LISA - Best of both worlds.

If you invested the £4,000 + £1,000 (bonus) / 12 (each month) you will be essentially dollar cost averaging for 13 years, that will significantly reduce risk as you will be buying high and low over the course, essentially balancing out the curve.

I would look in to a Global Index Fund - Maybe on the Vanguard platform for ease, cost and the whole fire and forget aspect. FTSE Global All Cap Index Accumulation is a good one for long term, low cost, low effort.

[Jawls]

You need to decide what you want the money for. Before you’ve done that, you can’t choose an appropriate product.

If to buy a house in the medium term and aren’t going to need the money for other purposes, cash LISA wins.

If to retire (and retirement is >10 years away) then a stocks and shares ISA is likely to be better. But then, you need to be comparing the ISA benefits to pension benefits. This depends on your tax status etc. Broadly speaking, pension better for higher tax rate payers.

There are also various downsides of LISAs in terms of means tested benefits that don’t apply to pensions.

[Jawls]

95JO said:

S&S LISA - Best of both worlds.

If you invested the £4,000 + £1,000 (bonus) / 12 (each month) you will be essentially dollar cost averaging for 13 years, that will significantly reduce risk as you will be buying high and low over the course, essentially balancing out the curve.

I would look in to a Global Index Fund - Maybe on the Vanguard platform for ease, cost and the whole fire and forget aspect. FTSE Global All Cap Index Accumulation is a good one for long term, low cost, low effort.

Vanguard don’t offer a LISA, so you’d have to buy that fund on a different platform.

(Other low cost, globally diversified passive funds are of course available!)

[AyBee]

Where else do you get 25% p.a. on your savings? S&S ISA for me and then you can pick your risk profile (13 years is a long time though and I'd be using the 25% as a buffer for higher risk if it were me, i.e. chance of losing the 25% vs. potential reward).

[Jawls]

AyBee said:

Where else do you get 25% p.a. on your savings? S&S ISA for me and then you can pick your risk profile (13 years is a long time though and I'd be using the 25% as a buffer for higher risk if it were me, i.e. chance of losing the 25% vs. potential reward).

Pension as a higher rate taxpayer will smash 25%. And once you remove the housing element, is actually less restrictive in terms of access than a LISA (can take at 55, likely to rise to 57/58 in medium term vs 60 for LISA).

[anonymous-user]

Jawls said:

AyBee said:

Where else do you get 25% p.a. on your savings? S&S ISA for me and then you can pick your risk profile (13 years is a long time though and I'd be using the 25% as a buffer for higher risk if it were me, i.e. chance of losing the 25% vs. potential reward).

Pension as a higher rate taxpayer will smash 25%. And once you remove the housing element, is actually less restrictive in terms of access than a LISA (can take at 55, likely to rise to 57/58 in medium term vs 60 for LISA).

That's true but being as LISAs were created to help younger people save moderately for retirement or house ownership and I imagine there are relatively few higher rate tax payers who don't already use the tax advantages that pensions bring I don't see many high earners saving for retirement in a LISA, they'd surely max out their pension and then perhaps take advantage of the LISA's 25% bonus. It must surely be a very small cross section of society who are both higher rate tax payers and using a LISA exclusively for retirement?

[Thin White Duke]

Thanks for the input guys. Much food for thought.

[Jawls]

sebdangerfield said:

Jawls said:

AyBee said:

Where else do you get 25% p.a. on your savings? S&S ISA for me and then you can pick your risk profile (13 years is a long time though and I'd be using the 25% as a buffer for higher risk if it were me, i.e. chance of losing the 25% vs. potential reward).

Pension as a higher rate taxpayer will smash 25%. And once you remove the housing element, is actually less restrictive in terms of access than a LISA (can take at 55, likely to rise to 57/58 in medium term vs 60 for LISA).

That's true but being as LISAs were created to help younger people save moderately for retirement or house ownership and I imagine there are relatively few higher rate tax payers who don't already use the tax advantages that pensions bring I don't see many high earners saving for retirement in a LISA, they'd surely max out their pension and then perhaps take advantage of the LISA's 25% bonus. It must surely be a very small cross section of society who are both higher rate tax payers and using a LISA exclusively for retirement?

Yes that’s my point. So the OP needs to decide what they’re using the money for and take into account their tax status, if a HRT.

[95JO]

Jawls said:

Vanguard don’t offer a LISA, so you’d have to buy that fund on a different platform.

(Other low cost, globally diversified passive funds are of course available!)

Good point - I used AJ Bell for my S&S LISA a few years back, pretty sure FTSE Global All Cap Index Acc is available on their platform OP.

Come to think of it, it is strange that Vanguard don't offer LISA's...