The ISA is post-tax savings account. This means contributions into the account are made by the individual through after-tax earnings. Any withdrawals from the account are made tax free. Current allowance for the 2019/2020 financial year is £20k p.a. the £20k p.a. is total sum over all ISA products including stocks and shares ISAs, LISAs, and cash ISAS.
I currently have three ISA products namely:
- Stocks and Shares ISA
This ISA provides you the opportunity and benefit to invest in the stock market, companies, particular sectors, buy bonds etc. Contributing money into a stocks and shares ISA does not automatically means you are investing; you have to choose funds and allocate money to that fund.
I am keeping my S&S ISA as my secondary retirement savings account and is currently held with Hargreaves Lansdowne but planning on changing to Vanguard. Vanguard UK is currently not app-based as HL is and also provides only their range of funds and stocks. HL on the other hand has products from a wide range of providers inc Legal and General, Fidelity, HSBC, Vanguard etc.
Note that most platforms offering Stocks and Shares ISA charge a platform administration fee.
Apart from your usual high street banks who offer limited products within a stocks and shares ISA, some platforms providing Stocks and Shares ISAs are Wealthify, Nutmeg, HL, Vanguard, Fidelity, etc
The LISA was introduced as another means (apart from the HTB ISA) to support first time buyers below the age of 40yrs in purchasing a first home or saving for retirement. You are allowed to save a maximum of £4k a year and obtain a government bonus of £1000 (i.e. 25% of whatever you save).
Withdrawals from a LISA for pensions is set for age 60.
Most fund options available for normal stocks and shares ISA are also available for LISAs.
For some info on house purchase with a LISA or HTB ISA, please refer to my other blog post
The rules stipulate that you can only use the account to buy a house after you have held it for a year. Note, not being sure when I would buy a house, I opened an account with a £1 to get the clock ticking and thanks to a brilliant move by the government, got an opportunity to transfer all my HTB savings in there when it first launched without counting towards my allowance. Currently, any transfers from a HTB ISA count towards your LISA limit for the year. I have received about £5k from the government by using a LISA.
- HTB ISA
I opened this when it first came out, As soon as the LISA was introduced, I also opened one and contributed £1 to get the ball rolling. Note: as I have mentioned earlier, you have to have held the account for a year before buying a house. You can keep saving into the HTB ISA until 30 November 2029. You’ll have until 1 December 2030 to claim the 25% state bonus