The ISA system is changing — here’s what I’m doing
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. Thatâs no use to me, so Iâm 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. Thatâs why itâs been my top priority in recent years.
Unlike a Self-Invested Personal Pension, withdrawals from an ISA arenât taxed. But since I have to wait until Iâm 60, Iâve been taking a distinctive approach to buying stocks in my LISA.
What Iâve been buying
While Iâm looking to maintain a diversified portfolio, Iâve only bought one stock in my LISA. The stock is Berkshire Hathaway (NYSE:BRK.B) and thereâs a reason why Iâve 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.Â
The majority of my investing is done in my Stocks and Shares ISA, where I donât pay transaction fees. And that gives me a bit more scope to be flexible.
While Iâm always looking to invest for the long term, thereâs an additional cost to making a change in my LISA. And thatâs why I use it for my Berkshire Hathaway investment.
Long-term thinking
Of all my investments, I think Berkshire Hathaway is the one Iâm least likely to want to sell before I reach 60 (in 2048). There are a few reasons for this.
First of all, itâs 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, Iâll focus on my Stocks and Shares ISA â but I still expect to be buying Berkshire Hathaway shares.
Unless something changes dramatically, the firmâs long-term prospects mean Iâll still want it to be part of my portfolio. And that will be true in whatever wrapper I end up using for my investments.
The post The ISA system is changing — here’s what I’m doing appeared first on The Motley Fool UK.
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Stephen Wright has positions in Berkshire Hathaway. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
