You are here: Home - Investing - Experienced Investor - News -

Half of Lifetime ISA investors are staying in cash

Written by:
Almost half of Lifetime ISAs remain in cash, earning little or no interest, according to analysis from AJ Bell.

Its research found 46% of AJ Bell’s Lifetime ISA (LISA) customers have not yet invested their money, preferring to hold it in cash. Tom Selby, senior analyst at AJ Bell, said the group’s LISA investors were cautious on stock markets at or near all-time highs. The average amount invested in an AJ Bell LISA is £2,520.

Selby said remaining in cash makes sense for first-time buyers who may need access to their cash at short notice, and added: “The last thing a house buyer needs is for the value of their investment to fall at the point they need it for a deposit.”

However, the group’s statistics showed 66% of investors are over 30 and 45% are aged 36-40. As such, they are more likely to be saving for retirement. Selby said: “Those using their LISA to save for retirement may be opting to wait for a market fall before choosing to invest. However, for these people, timing the market can be difficult, so deciding when to take the plunge is a big decision. Investing for the long-term means they have time to ride out any short-term market volatility and if they are concerned about immediate market falls they could consider drip feeding their money into the market over the next year.”

“It’s also important not to forget that cash still carries risk. In the long run, inflation will erode the purchasing power of cash and investors will miss out on the magic of pot-boosting compound returns.”

Of those who have invested, passive investments proved more popular, making up six out of the top ten most popular investments. Selby said this suggests investors are looking for low-cost, off the shelf, solutions to access markets. Of the active funds, Fundsmith Equity and Baillie Gifford Managed funds proved popular. research earlier this year revealed that two of the four investment LISA providers pay the government bonus into a cash version of the product, meaning investors could miss out on significant returns unless they actively re-invest their money. See Investment LISA savers warned bonus may idle in zero-return cash account for more information.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
Auto-enrolment may bring false sense of security – NOW: Pensions

Those saving into a workplace pension may be lulled into a ‘false sense of security’, with many not knowing what...