oops indeed I meant to say from 10k profit to 14k profit
I know nothing about you, and I’m not one to lecture but just consider:
Buying a property is incredibly low on your priorities right now, but priorities have a way of changing. The beauty of a LISA is that you can use it for a property purchase or let it roll until you’re 60. 60 really isn’t all that old, and then it’s tax free money you can use for anything you like!
Tell you what, though, I bet you that the government will kill the LISA in years to come, and if you then find yourself in the unfortunate place of wanting a property and no longer having access to the bonus, that would suck.
And yeah, you can withdraw at any point and incur an overall 6% loss on what you put in, but it’s an escape hatch if you need it.
Good idea - perhaps it is a solid idea to pay the bare minimum into one now. The reason house buying is low on my agenda is that I currently live with my partner in a property she owns - if we were to buy a property together in the future would my LISA still be valid to use against it? I ask because it would be my first home but not hers.
Thanks @louisotto - this is just what I am thinking at the moment.
100%! In fact, you wouldn’t have to pay any stamp duty either on the new purchase as you qualify as a first-time buyer (even in part)
Ah interesting - so all those bonuses are unaffected by any other buyer.
Exactly, they’re perfectly fine to use on a joint purchase. Also, the other thing you’d have to consider is (and fingers crossed it doesnt happen) if she were to ever kick you out, you need your own security and to be able to move on with your own life.
Speaking from experience there!
And then just to add, if you were to ever be added to her mortgage, you’d lose all the home-associated bonuses of the LISA immediately (including stamp duty etc)
Good to know, and sound advice - thank you very much.
This isn’t what I’ve been told by others - if only one person in the partnership is a first-time buyer, then stamp duty does still have to be paid. Am I wrong, or is my understanding out-of-date?
For example, from the Money Advice Service:
I’m buying a house with my partner. One of us is a first-time buyer, the other is not. Can we still get Stamp Duty relief?
If you’re married and jointly buying a property, then you both need to be first-time buyers to get Stamp Duty relief.
Unmarried people can still get a reduction in Stamp Duty, if the only person named on the mortgage deed is a first-time buyer.
As with anything, there are caveats:
If you’re married and jointly buying a property, then you both need to be eligible first-time buyers to get First-Time Buyers Stamp Duty relief.
Unmarried people can still get a reduction in Stamp Duty, if the only person named on the mortgage deed is a first-time buyer.
Did we both look up the same site at the same time?
You know what they say about great minds
This might be another thread entirely, but as for setting up a modest LISA would it be worth using a cheaper platform and just investing in some similar EFTs to my Nutemg ISA?
Is the LISA for a house or retirement?
If its for a house within the next couple of years you may prefer not to put it into investments and use a standard interest bearing LISA account.
As I said above, buying a property is not on my radar at all a the moment. I’ll need to give it a think.
My LISA is with Nutmeg and I don’t think the fees are that bad I understand the large debate between choosing your own funds and stocks and having someone manage them but for me it makes sense.
As it isn’t on your priority list it may be worth opening a cash one for the time being and having it sit there - or alternatively setting up a lower risk managed fund. It really is down to you and how long you think you’ll leave it, what you want out of it etc etc.
Think of fees in this way though - what percentage of your growth are you giving up to them?
Let’s be conservative and say that the stock market will grow at 5% average over the next 20 years. Round the fees to 0.5% to make the maths easier!
You are giving up 10% of your growth. So for every 1k you have invested, in 20 years it would have grown to 1000*(1+0.05)*20 = 2653, but with fees it only grew to 1000(1.045)**20 = 2411, i.e. you gave up 242 of your growth to fees. Run those numbers for a lifetime, say 40 years and real numbers, say a pot ending up at 250k, you are giving up around 50000 of your money to fees. If you’re successful enough to run a fund of a million, you’d give up 200k to fees! (A bit less as they often reduce the fee take as your pot increases, but remember the initial fees are taken at source so you lose the growth on those fees from the beginning).
This is why FEES MATTER.
Minimise them. The actual growth you will achieve is in the hands of the gods, but you do have control over the fees.
For me, any widely diversified market follower is as good as any other, so I’d pick from the lowest fees tracker I can find. That’s not nutmeg.
You could consider different things. if you think you will use it for a house but not for a good few years 3+ bare minimum, more preferably, then you might consider a S&S LISA and put it into a lower risk EFT or similar depending on how much risk your happy with. I wouldn’t recommend it for anything under a few years.
You’ll have the potential of gaining more than 1%~ that’s on offer in savings LISAs + the 25% bonus, but are at risk of potentially gaining nothing or losing some. You could consider the 25% a buffer to this, your already up 25% if your eft goes down -4% then your still up 21%, but, you now have 21% instead of 26% you would have got in a savings LISA.
@DaveTMG does make a good point on fees. Especially if your just wanting to put it into an EFT and forget. You dont need anything else but somewhere for it to just sit, so low fees are what you want. There are lots of low fee EFTs though so there’s lots to choose from, you just want to find a low fee platform as well that fits your needs.
I don’t dispute the maths, but my timescale is much shorter than 20 years. I am also gaining 25% on the money I put in the minute I put it into the LISA. I am very new to investing, stocks, LISAs the lot - I was comfortable that what I wanted from Nutmeg could serve my purpose for the LISA and so far I am happy with it.
And to be honest, if I was putting that sort of money in, I would of course be very unlikely to be using a managed portfolio - its like the Cash ISAs, for some having the convenience to leave it and let it be looked after (for the cost of the fees) is more palatable than going out and finding the best deal.
I completely understand that the fees cut into my growth, but I’m okay with that - it sometimes comes across that some feel they are “better” because they don’t use managed portfolios when really it all comes down to the individual. EDIT: this isn’t aimed at you DaveTMG just sometimes comes across from those who pick and choose their own stocks!
I definitely feel this - ultimately before I opened my Nutmeg ISA in January my money was earning 0%, so compared to that any gain is a positive regardless of fees. Never the less having the Nutmeg investment has opened my eyes to the world of investing and meant that I have done a vast amount more research. I think I am going to start directing a little money a month to some EFTs on Freetrade as well as investing small amounts in companies I believe will grow over the course of my life.
New platform with relatively low fees at 0.66%. Still higher than Vanguard.