The first thing I try to do every financial year is get as much money as I can into my Lifetime ISA (LISA). But this could be set to change as the government looks to shake things up.
According to Martin Lewis, the LISA is being replaced with a product for first-time buyers only. That’s no use to me, so I’m figuring out what I should do.
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LISA strategy
As it stands, the LISA can be used for two purposes. One is buying a first home up to a value of £450,000 and the other is in retirement after the age of 60.
The annual contribution limit is £4,000, which comes out of the wider £20,000 ISA limit. But the big advantage is that anything deposited gets a 25% bonus from the UK government.
A 25% head start gives me a pretty good chance of outperforming the wider stock market over the long term. That’s why it’s been my top priority in recent years.
Unlike a Self-Invested Personal Pension, withdrawals from an ISA aren’t taxed. But since I have to wait until I’m 60, I’ve been taking a distinctive approach to buying stocks in my LISA.
What I’ve been buying
While I’m looking to maintain a diversified portfolio, I’ve only bought one stock in my LISA. The stock is Berkshire Hathaway (NYSE:BRK.B) and there’s a reason why I’ve taken this approach.
Unlike my Stocks and Shares ISA, I incur costs whenever I make an investment in my LISA. Since this includes a flat fee per transaction, I try to pay it as infrequently as possible.
The majority of my investing is done in my Stocks and Shares ISA, where I don’t pay transaction fees. And that gives me a bit more scope to be flexible.
While I’m always looking to invest for the long term, there’s an additional cost to making a change in my LISA. And that’s why I use it for my Berkshire Hathaway investment.
Long-term thinking
Of all my investments, I think Berkshire Hathaway is the one I’m least likely to want to sell before I reach 60 (in 2048). There are a few reasons for this.
First of all, it’s the company that I think is most likely to be around 22 years from now. The cash on its balance sheet by itself should be enough to protect it against all but the worst disasters.
It also has a diversified collection of subsidiaries that operate in durable sectors. Rail, for example, is one of the rare industries where companies can issue 100-year bonds.
A major disaster could cause a big loss in its insurance business. But beyond that, the risk-averse nature of the way the firm is run makes me very optimistic about its long-term prospects.
What should I do?
Martin Lewis thinks the LISA is going to go in 2028. If that happens, I’ll focus on my Stocks and Shares ISA – but I still expect to be buying Berkshire Hathaway shares.
Unless something changes dramatically, the firm’s long-term prospects mean I’ll still want it to be part of my portfolio. And that will be true in whatever wrapper I end up using for my investments.
