Holly's Blog: LISA and a low cost gauntlet
By Mike Narouei, Content Producer at Boring Money
27 Oct, 2017
This week we look at how Lifetime ISA take-ups have gone and we check out the details of a growing investment service which is pretty cheap for larger accounts.
The still unloved LISA
Just to recap (because there are so many flipping types of ISA these days!!)... a Lifetime ISA is a Cash or Stocks and Shares account that can be opened by anyone aged between 18 and 40. You can add up to £4,000 each year, which the government will top up with another 25% – so potentially adding an extra £1,000 per year to your savings. The catch is that your savings must be used to purchase a first home or save for retirement. For anything else there are 25% exit fees, which take back the 25% Government bonus, as well as taking a small slice out of your savings.
LISAs have been a bit slow to catch on. Skipton Building Society was the only group to offer a Cash LISA (as opposed to a Stocks and Shares LISA) up until August 2018. Since then, you can now also choose Cash LISAs from Newcastle Building Society as well as Nottingham Building Society.
Only a handful of firms offer Stocks and Shares LISAs - Nutmeg is probably the best for investment newcomers and we'd suggest AJ Bell Youinvest (https://www.boringmoney.co.uk/best-buys/reviews/aj-bell-youinvest/) or Hargreaves Lansdown for those who want to dig a little deeper into the stock market.
Interactive Investor throws down a low-cost gauntlet
In other news this week, Interactive Investor announced some pricing changes. These guys are ramping up and have bought TD Direct Investing (https://www.boringmoney.co.uk/quick-reads/lisa-and-a-low-cost-gauntlet/) which makes them the second biggest broker in Blighty. They'll also be adding Trustnet Direct to the fold. You will pay a flat £22.50 per quarter for their investment accounts regardless of how much you hold. Charges for their pension are also reportedly increasing from £96 to £120 a year.
If you're currently with TD, the move to a flat fee means you're likely to see your charges fall if you have more than about £30,000.
Reviews on our website for Interactive Investor tend to focus on the platform’s low charges but are less happy with the website and service. They're clearly in an ambitious growth phase with a new board and chief exec. They do have work to do to get their service to the same level as the pricier giant Hargreaves. It will be interesting to see how they tackle this. It's certainly another challenge to Hargreaves who start to look just too expensive for larger accounts.
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