Author Topic: Should I invest in a UK LISA? (bit of a case study, all nationalities welcome!)  (Read 1311 times)

shelivesthedream

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See here for an explanation of ISAs and LISAs: http://www.bbc.co.uk/news/business-37318001

Current life situation
26F, married, no children yet. Husband studying, I'm earning (self-employed, not loads so in a low tax bracket now). Husband graduates next year and then starts working (he's not interested in RE, super-passionate about his career) and we get a house with his job. Hoping to have children in the next few years and then I will take maternity leave and see how I feel about staying at home vs working, but I imagine I will go back to work part-time in due course.

Financial goals
We don't have a defined FIRE plan at the moment, and who knows where life will take us, but as well as "saving as much as we can" there are some things in our future I think we ought to prepare for:
- To eventually buy a house to live in when husband retires (probably at 65 but I suppose things might change) - either to buy when he retires or to buy earlier and rent out if it seems like an opportune moment. Probably in the south-east where house prices are very high because that's where friends and family are.
- For me to be able to say no to freelance jobs for non-financial reasons (either staying home with kids or just because the job sucks) without worrying about it
- General financial security in short and long term (money for emergencies and for retirement)
- For husband to be able to retire earlier if things change with his work (which it's looking like they might) from 2035 onwards

Current savings
Approx 7000 in a SIPP
Approx 45,000 in a stocks and shares ISA
Approx 10,000 in some kind of mutual fund (gift from my grandmother, don't really understand it but it does OK)

BIG QUESTION: Should I invest in a LISA when they start next year?

I currently pay 50/month into my SIPP as a sort of diversifying hedge, but all of our other savings go into the S&S ISA. In the future I anticipate saving between 6000 (young children, picky about work) and 12000 (no children, work as much as I can) a year, so I could put 4000 into the LISA and the rest into the S&S ISA. I'll only be able to withdraw from the LISA if we buy a house for us to live in (either at 65 or earlier if husband suddenly wants to retire early, but will definitely happen at some point in our lives) or we reach age 60 (which, obviously, we will do at some point). But I don't know if the free money (free bonus 1000 for annual 4000 contribution up to a maximum of 32,000 free bonus money, plus then grows normally as a stocks and shares investment) is worth the lost flexibility - or whether it's worth it because we'll have the S&S ISA which we can access at any time so we can spend that down if necessary and afford to wait to access the LISA at age 60.

(I don't think the state pension will disappear by the time I get there, but I anticipate our costs will rise as we age and get less able to do things for ourselves, so I'm currently viewing that as our "old person extra money for taxis and higher heating bills" and not counting it in when I calculate future expenses.)

frugledoc

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can't really tell at the moment because the details on LISAs haven't been clarified.

At the moment it looks like you can get the money out at any time if you want but with a a big penalty.  This penalty is quite high and seems politically unpopular so I am hoping it will be ditched.

It is tough to give up the offer of tax free cash though

What is your husbands career
« Last Edit: October 29, 2016, 03:32:42 AM by frugledoc »

BrokenBiscuits

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My partner is self employed and we are certainly considering the life time isa for her.  Not sure if we will commit yet until all the info is available.
I've read up on it as best as you can at this time and it seems if you try and access before 60 you will likely lose all the benefits you gained from it in penalty early withdrawal charges.

If you are mustachian, you are unlikely to be working at 60? And so the product may be a good idea after or as well as a number of investments that can be accessed earlier.

Getting a 25% boost on investments is not to be sniffed at if you can "ladder" the bulk of your other investments so they are available to you pre 60 years old.

JrDoctor

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LISA sounds pretty sweet, 25% savings boost and no tax to pay on profits ever and if you are a peasant like me with no property you can liquidate it for property.  I'd say it is a no brainer.

shelivesthedream

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LISA sounds pretty sweet, 25% savings boost and no tax to pay on profits ever and if you are a peasant like me with no property you can liquidate it for property.  I'd say it is a no brainer.

Only problem for me is that you can't use it to buy a buy-to-let and my husband will get a house with his job for the foreseeable future (which could well be until he retires at 65). Is the lost income worth the flexibility for me? Or am I worrying about nothing?

JrDoctor

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LISA sounds pretty sweet, 25% savings boost and no tax to pay on profits ever and if you are a peasant like me with no property you can liquidate it for property.  I'd say it is a no brainer.

Only problem for me is that you can't use it to buy a buy-to-let and my husband will get a house with his job for the foreseeable future (which could well be until he retires at 65). Is the lost income worth the flexibility for me? Or am I worrying about nothing?
Part of your portfolio will be tied upto 60, much like your pension probably will be later on, thats fine, as long as you have a financial bridge between when you retire and can get access to your LISA.