AJ Bell launches lowest cost DIY Lisa

Hargreaves Lansdown's self-select Lisa, by contrast, has annual fees of £22.50 for assets worth £5,000. Hargreaves Lansdown charges an annual custody fee of 0.45 per cent on the first £250,000 of assets in funds and caps the fees it charges on shares, exchange traded funds (ETFs) and investment trusts at £45 a year.

It also charges more than AJ Bell to deal shares, ETFs and investment trusts. AJ Bell charges £9.95 per deal for infrequent traders compared with Hargreaves Lansdown's £11.95 charge, although both brokers charge frequent traders less per trade. However, Hargreaves Lansdown does not charge to deal funds whereas AJ Bell charges £1.50 to buy or sell a fund.

The Share Centre and Nutmeg have also launched stocks and shares Lisas but these offer a range of ready-made portfolios rather than allowing investors to choose their own investments.

AJ Bell has the cheapest annual fees for small portfolios. The Share Centre does not charge an account administration fee or to deal investments, but the cost of the funds that underlie its ready-made portfolios are more expensive than those in Nutmeg's portfolios, or some of those you could choose with AJ Bell or Hargreaves Lansdown. The Share Centre offers three portfolios – cautious, positive and adventurous – and fund charges range between 1.92 per cent and 2.01 per cent.

Nutmeg charges annual fees of 0.75 per cent for its fully managed portfolio and 0.45 per cent for its fixed allocation portfolios, both of which are made up of ETFs. The fund fees of its fully managed portfolio are on average 0.19 per cent, and 0.17 per cent for its fixed allocation portfolios.

The Lisa was launched in April and can be opened by those aged between 18 and 40. They can then contribute up to £4,000 a year and receive a 25 per cent government bonus each year until they are 50, and use it to help to buy a first home or for retirement savings. Anyone withdrawing the money before they are age 60 other than to buy a first home will suffer a 25 per cent exit fee on the value of their pot, although this restriction does not start until April 2018.

In April 2017 six platforms including Bestinvest.co.uk, Fidelity, IG and AJ Bell told Investors Chronicle they were planning to launch a stocks and shares Lisa, but of these only AJ Bell has brought out its product. Commentators say providers may be struggling to keep up with the pace of government overhauls to pensions and savings. 

"The rules for Lisas are complicated, which means adapting existing systems to cope with the tax relief, bonus, age restrictions and exit charges," says Mike Barrett, consulting director at research consultancy the lang cat. "And communicating with HM Revenue & Customs to ensure the total limit across all Isa products is not exceeded is no mean feat. Also, the rules were only finalised a few months before Lisas were expected to launch, giving providers little time to develop an offering. Lisas have also been introduced at a time when many platforms are still dealing with the implications of previous government initiatives such as pension freedoms. And many are working to update their technology to meet customer expectations for a more user-friendly experience."

Platforms also say they are reluctant to launch a Lisa as they are unsure as to whether demand is large enough, particularly as the Lisa has similarities with the Help to Buy Isa – a cash Isa that also offers a 25 per cent government boost on savings.

"We have no plans to offer the Lisa," says Adam French, chief executive officer of online investment manager Scalable Capital. "It is a complex product and the target market is unclear. We believe that a stocks and shares Isa, which is more flexible with fewer rules, and a self-invested personal pension (Sipp), which offers greater tax relief, are more suitable products for many savers."

And Mr Barrett questions "how big the market actually is for Lisas, given its numerous restrictions and direct competition from Help to Buy Isas and pension products. In the face of uncertain demand and other challenges, although offering Lisas might be on a platform's wish lists, it may be some way down a pretty long list."

There are also concerns that people will divert potential pension savings into a Lisa and use them to buy a first home instead of keeping them for retirement. 

Andy Bell, chief executive of AJ Bell, adds: "Investors need to be aware of the exit penalty, which we think is too high and unnecessary. But aside from that a Lisa is worth considering alongside pensions and traditional Isas."

Stocks and shares Lisa costs

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