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Saving app launches Lifetime ISA: how does it stack up?

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Written by: Paloma Kubiak
16/01/2018
Saving and investing app Moneybox has launched a Lifetime ISA for people under the age of 40 to save for their first home or retirement. How does it compare to the other Lifetime ISA offerings?

The Moneybox Lifetime ISA (LISA) launch brings the grand total of providers offering the product to seven: there’s one cash LISA offered by Skipton Building Society, four investment LISAs from AJ Bell, Hargreaves Lansdown, Nutmeg and The Share Centre, and a With Profits LISA from Foresters Friendly Society.

The LISA launched in April 2017 and allows those aged 18-39 to save up to £4,000 a year for their first home or retirement where they will receive a maximum £1,000 bonus from the government. See YourMoney’s Lifetime ISA guide for more information.

Moneybox, which is predominantly aimed at millennials, said over 80% of its existing customer base fall within the 18-39 age bracket for the LISA, adding that “it’s well placed to help young people take full advantage of the opportunity”.

How does Moneybox compare to other Lifetime ISA products?

Moneybox was launched in August 2016 and raised £4m to launch the LISA. The app is free to download on iOS and Android and lets users round up their purchases to the nearest pound to invest their spare change into thousands of global companies via three tracker funds.

As an example, if your coffee costs £2.40, you can round-up the 60p towards the LISA. However, app users can make additional savings through regular deposits, payday boosts and can make one-off payments to help savers get closer to the £4,000 LISA limit.

Via the Moneybox stocks and shares LISA, people can invest money into three options: cautious, balanced and adventurous which all contain a mix of three tracker funds. These funds are provided by Vanguard, Henderson and Blackrock, who invest in a portfolio of global companies.

When it comes to fees, Moneybox charges a subscription fee of £1 a month, though this isn’t charged for the first three months. But there is a platform fee of 0.45% of the value of your investments which is charged annually and billed monthly. Fund provider fees are 0.23% on average and Moneybox confirms there are no trading or transaction costs, and it doesn’t charge users for withdrawals. 

There’s no minimum monthly contribution so users can start saving from £1. Moneybox said in 2018, the average app user is on track to set aside £1,000+ and in 2017, its most popular investment option (adventurous) delivered an annual return of 7.1% on a £1,000 investment).

Another point to note is that it will allow people with a Help to Buy ISA transfer the money to its LISA. In order to do this, you need to open a LISA with Moneybox first.

Lifetime ISA charges on other investment platforms

AJ Bell

The AJ Bell LISA launched in June last year and allows DIY investors to access funds, shares, investment trusts, Exchange Traded Funds (ETFs), gilts and bonds, as well as its passive and ‘favourite’ funds.

Its minimum investment amount is £25 per month and it has a platform charge of 0.25% so the annual cost of a £5,000 LISA (including £1,000 government bonus) will be £12.50.

The investment charge will be whatever the charge is for the fund, investment trust or ETF chosen by the investor. The only other charges to be aware of are dealing charges – which are £9.95 for buying shares and £1.50 for buying funds.

Hargreaves Lansdown

The platform charge for the LISA is 0.45%. The annual charges for funds depends on which ones you hold, so a tracker fund like the L&G UK Index fund might cost 0.06% – bringing you to a total of 0.51%. However, a managed fund like the Woodford Equity Income fund could cost 0.6%, which is a total of 1.05%.

On £4,000, a 0.51% charge would be £20.40, while a 1.05% charge would be £42.

Nutmeg

The costs for the LISA depend on whether an investor chooses Nutmeg’s fully managed portfolio range or its fixed allocation range.

On a £5,000 investment, the charges over the year are as follows:

  • Fully managed: Nutmeg fee of 0.75% (incl VAT), average investment cost of 0.19%. The total estimated costs over the next 12 months are £53.
  • Fixed allocation: Nutmeg fee of 0.45% (incl VAT), average investment cost of 0.17%. The total estimated costs over the next 12 months are £37 for fixed allocation.

Nutmeg is the only stocks and shares LISA provider that can’t accept Help to Buy ISA transfers.

The Share Centre

With its ready-made LISA, there’s no dealing commission, account admin fee or initial charges. But you will need to pay ongoing fund charges within the underlying fund.

The Ongoing Charge Figure (includes 0.75% Annual Management Charge) are as follows:

  • SF Cautious: 1.69%
  • SF Positive: 1.74%
  • SF Adventurous: 1.82%

There is a £25 fee to transfer your account to another provider but it’s free to transfer to it from another provider.

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