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My deposit for a flat is shrinking in my Stocks & Shares Lifetime ISA - what can I do?

By Mike Narouei, Content Producer at Boring Money

18 Mar, 2020

In a new series, Holly provides straightforward answers to your difficult questions.

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- "I am a very small investor and to be quite honest I don't understand enough about the markets or how to proceed. I use robo platforms. My LISA requires attention - it needs filling for this tax year and ideally again early in the new tax year in order to gain the government bonus in time to buy a flat (also uncertain!). However, as I optimistically opened a S&S LISA rather than a cash ISA, my deposit is shrinking."

People under 40 can get a Lifetime ISA to save for a first property or for retirement. The benefit is that the Government will contribute a 25% bonus on money up to £4,000a year that you pay in. You’ve got to be sure it’s long-term though – there are penalties for early access or if you take the money out for anything else.

We all have an annual allowance of £20,000 for ISAs – whether cash, lifetime ISAs or stocks & shares ISAs. And the end of the tax year is 5th April. So you have until then to use it – or lose it.

Markets are nerve wracking at the moment. I get that. I’ve seen quite a few crashes – and recoveries – so I know it will all come back. But the downwards bit is always a test.

What lots of people don’t know is that you can have a stocks and shares ISA or a Lifetime ISA and still pay in as cash. It can sit in that account – as odd as it might sound – as cash, you get to use your annual allowance (or part of it) and you don’t have to decide right now what to invest in. The point is you only have till 5th April to make that contribution into these lovely tax efficient accounts – and get the Brucie bonus from the Government in the Lifetime ISA.

What’s not clear to me is your timeframes for buying. If they are coming up – in the next couple of years – then I would leave the money in cash. Get your 25% Government contribution – that’s not a bad return – but investing in in the stock market over such a short timeframe is playing with fire. You mention you’re in a robo – if that’s Nutmeg, you can still pay in to this account but select the cash pot.

Good luck.


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