The Lemon Fool

Having decided a LISA is preferable to a Help to Buy for my offspring as we can put more into it, I've just about settled on AJ Bell as the cheapest platform. The money will be going into a Vanguard LifeStrategy Fund, probably 100% equities.

Anyone think I'm making the wrong decision on either the LISA rather than a Help to Buy, or choice of cheapest decent platform, please let me know.

Thanks.

Ref AJ Bell, I already run a SIPP for Mrs BD with them and am therefore familiar with their service, website etc. (and Russ Mould videos, which I rate highly).

If there are no better options, and I can't see one, that's where I'll open the LISAs. Thanks.

Went through the same review process for eldest daughter last tax year. AJ Bell seemed the best choice at the time and nothing to complain about since.

I think the LISA is a much maligned product for no good reason. Best case you get free money towards a house deposit, she’s at University hence not paying tax. Worst case you want to spend it on something else and give the free money back. I really don’t see a downside.

Juan.

Be aware that if you withdraw from a LISA early, not for a house deposit, then the financial penalty is actually more than the bonus you receive - ie you do lose out.

Jabd2001 wrote:Be aware that if you withdraw from a LISA early, not for a house deposit, then the financial penalty is actually more than the bonus you receive - ie you do lose out.

Well corrected, thank you. There is a 5% penalty on deductions which I happily glossed over.

I do stand by my point that this is a good product suited for young people, especially those “pre-tax” such as students, saving for a house deposit.

JuanDB wrote:

Jabd2001 wrote:Be aware that if you withdraw from a LISA early, not for a house deposit, then the financial penalty is actually more than the bonus you receive - ie you do lose out.

Well corrected, thank you. There is a 5% penalty on deductions which I happily glossed over.

I do stand by my point that this is a good product suited for young people, especially those “pre-tax” such as students, saving for a house deposit.

It’s a 6.25% penalty not 5% surely.
£4000 in plus £1000 bonus gets hit with £1250 penalty. So you are £250 down on your £4000.

DrBunsenHoneydew wrote:£4000 in plus £1000 bonus gets hit with £1250 penalty. So you are £250 down on your £4000.

You get hit if the investment choices do well.

So double your existing stake to £ 10,000 and lose £ 2,500 in clawback leaving £ 7,500. Start with £ 4,000 and it would be worth £ 8,000.

Is there much choice in provider? I thought the take up of those wishing to offer this product wasn't great.

I've done much the same thing myself, although I opted for LS80 with Hargreaves Lansdown. The annual charge is higher (0.45% versus 0.25%) but there is no charge to buy and sell unlike A J Bell. The best option depends on the quantum, frequency and expected duration of your investment, but I haven't worked it out for different scenarios. The less you invest, the more frequently you do so and the shorter the expected duration of your investment the more the decision leans in favour of Hargreaves Lansdown and vice versa I think. There is probably little in it.

You might want to consider the ETF versions of those funds as both H&L and AJ Bell have minimal capped annual fees for shares, AJ Bell the lowest cap

This makes the annual platform fee practically negligible

Combine with £1-2 regular investment share dealing charges (which you can use for lump sums)(limited number ETFs though, AJ Bell has biggest list)

I found with HL that for the first few years the lower investing costs of funds made them more attractive than ETFs. Once the sums build up I'll advise my nephews to switch to the latter.