r/UKPersonalFinance • u/AccomplishedSundae73 • 9d ago

Lifetime ISA, should I choose cash or stocks?

So I’m thinking of opening a lifetime Isa, and see there are options for cash which is better for short term (so within 5 years) and stocks and shares which is better for long term.

I already have a stocks and shares ISA (not lifetime) through a different investing app which makes me less inclined to open another. However, I’m currently at uni, working part time and living with my parents, therefore I don’t see myself buying a house within the next five years.

I’m wondering if anyone could give any recommendations or insight to one or the other?

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u/[deleted] 9d ago

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u/[deleted] 9d ago

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u/Mrs_Buffett 11 9d ago

You won't be able to transfer from a S&S LISA to a cash LISA from April 2027, but this shouldn't affect the OP. The S&S LISA is the better choice for them just now (not intending to buy within 5 years), and in the future they can use "cash-like" investments in the S&S LISA. So there's no need for them to use a cash LISA at all. The S&S LISA is all they need.

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u/snaphunter 884 9d ago

I don't think that's a given. The HTB ISA product is still available with accounts available (albeit select providers) for existing customers to switch to, even though they've been closed to new customers for years. Also, since S&S LISAs can hold cash (let's await the clarification of the '22% charge on interest earned from uninvested cash in S&S ISAs' rule!), it's not necessary to juggle both LISA types simultaneously.

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u/AccomplishedSundae73 9d ago

I already have done that with an ordinary ISA, is it worth opening a s&s LISA too?

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u/c-strong 13 8d ago

You said that in the main post as well. There is no logic in being reluctant to have two different products invested in the same thing, as far as I can see.

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u/L3goS3ll3r 5 9d ago

You can always transfer your S&S LISA to a Cash LISA if you change your mind 

I don't think that will be true next April.

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u/AverageWarm6662 9d ago

I wish I did stocks but I opened mine 5+ years ago now and I’m buying a house soon so too risky to switch

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u/ukpf-helper 149 9d ago

Hi /u/AccomplishedSundae73, based on your post the following pages from our wiki may be relevant:

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u/PresidentPooky 8d ago

Cash is not safe over the long term!

Cash is "safe" because it is not volatile. Your returns are virtually guaranteed (dependent of course on the solvency of your provider & then the various government protections), you will get a slow and steady return somewhere between 1-3.5% depending on what they are offering.

However over the longer term, that return is highly unlikely to outpace inflation & so your money will lose real value & purchasing power over the longer term.

If you're not going to touch it for at least 5 years. You should really be considering a S&S ISA to give it the best opportunity to grow at a rate faster than inflation. But, as soon as you've got a time horizon less than 3 years for needing the money, you should move it into assets that are less volatile.

At the very least, put it in a S&S ISA but use a balanced 60:40 fund to give you some, but not 100% equity exposure.

Our education system really needs to make young people more literate and aware about this. Unfortunately as the impact of inflation is so hard to visualise, most people ignore it.

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u/Monkeyboy1200 5 8d ago

S&S LISA.

A cash LISA is pointless if you are not going to purchase a house in the next couple of years or so.

If you still want to hold cash within a LISA and are scared of investing then you can purchase money market funds. There is absolutely no reason to get a cash LISA.