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  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 16th Mar 16, 5:06 PM
    • 75Posts
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    MSE Helen Saxon
    Lifetime ISAs guide
    • #1
    • 16th Mar 16, 5:06 PM
    Lifetime ISAs guide 16th Mar 16 at 5:06 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you haven’t already, join the forum to reply. If you aren’t sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,
Page 13
    • bowlhead99
    • By bowlhead99 17th Mar 17, 6:26 PM
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    bowlhead99
    Could we not just contribute £1 to a S&S LISA and just leave it in the account without actually investing it and then when a Cash LISA comes along transfer it out? That way we still get the 1 year countdown.
    Originally posted by karl271186
    We could. Well, you could, I can't because I'm already 40 It is already an idea suggested in the articles on the main site and threads on the forum such as this one.

    However, you'll find some/most S&S providers do not want to take on customers for a pound and establish their accounts for free just to be used as a stop-gap warehouse for your £1 contribution before making them transfer it somewhere else for free. So, the providers will generally have minimum contribution levels and likely have transfer-out or account closure fees.

    You probably don't want to put £31 into an account, then later pay a £25+VAT exit charge to leave yourself with the £1 being transferred out to your longer-term provider of choice. Some people might, because of their desperation to get their bonus and be allowed to spend it asap after the first bonus is credited, because the bonus on £4k is larger than the £30 thrown away.
    • bowlhead99
    • By bowlhead99 17th Mar 17, 6:57 PM
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    bowlhead99

    Is it just me or is that paragraph (my bold) of the reply from HL very misleading?
    Originally posted by badger09
    No.

    1) the charges are the same for LISA as ISA.

    Sounds OK.

    2) the ISA his a management fee of 0.45 capped at£45pa on the value of shares and bonds and investment trusts and etfs. Where a fee is charged (implying there is not always a fee charged, which stands to reason because not all ISAs will contain individual company shares, bonds, investment trusts and ETFs), it is charged on the value of whatever holdings attract the fee, measured at end of month.

    Sounds OK. That ISA management fee is not a fee which is payable on having those same holdings in an "unwrapped" trading account, but HMRC compliance is not free and they have to make money somewhere if your trading costs for buying or selling those various items oh the stock exchange does not make very much money. For example you may be a buy and hold investor, and the assets might have been bought via another broker and then transferred to your HL ISA. So we can understand why there is an annual fee for ISA management.

    3) there is a separate charging structure in place for Funds held in any type of Vantage account, and that is at 0.45% uncapped for the first £250k in each account.

    Sounds OK. I mean obviously v. expensive on large amounts and pennies a month on small ones, but doesn't seem badly explained. Vantage is their brand name for their consumer-facing investment accounts, whether unwrapped, SIPP, LISA, ISA etc so if you have 999,996 of funds split four ways you could be potentially paying 0.45% on everything.

    4) link provided to full set of all the charges you might want to know about

    Sounds OK.

    I don't know what's "very misleading" about their high level explanation of the costs of holding an ISA account when supplemented by a link to the more detailed full charges sheet. There is only so much you can fit into a high level summary of "yes we are doing LISA with charges same as ISA here is a precis and link to discover more".

    The only thing that might be misleading is if in their email they had done what you had done and bolded that one paragraph where they said that their fee for ISA management was capped at £45 and not also bolded the bit that said that charges on funds you choose to hold through their platform are not capped until you get to £2m of holdings.
    • badger09
    • By badger09 18th Mar 17, 1:12 PM
    • 5,172 Posts
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    badger09
    I stand/sit corrected
    • resk
    • By resk 18th Mar 17, 4:46 PM
    • 16 Posts
    • 8 Thanks
    resk
    Hello

    First post on this forum, hi everyone!

    I've read the LISA guide and all the comments on this thread, but I still can't work out if a LISA is a good idea for me! I'm a homeowner already, so if I get a LISA it'll be to get a nice little tax free lump sum (with contributions from The Man!) when I'm 60, as a supplement to my pension. I'm 36 y.o. and a higher rate tax payer, although I currently max out my pension contributions to get my taxable salary down to pretty much bang on the 20%/40% threshold. I own two properties and I'm hoping to get one of them sold in 2017/18 - with these funds, I'm considering starting a S&S ISA in 2017/18, but I can't work out if I should put the full £20,000 allowance into this, or put £16,000 into it and £4,000 into a LISA.

    Also, I'm sure it's covered somewhere but I can't figure out - if I contribute to a S&S ISA every year as I plan to do, does that mean I can't put money into an "investment" LISA in the same year i.e. I would have to take a "cash" LISA? Or can I contribute to both a S&S ISA and "investment" LISA in the same financial year? If it's the former, I'm not sure a LISA is right for me - I suspect I may be more sensible putting the full 20K per year into an S&S ISA.

    Any thoughts? Please be gentle.....
    • masonic
    • By masonic 18th Mar 17, 5:29 PM
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    masonic
    I'm considering starting a S&S ISA in 2017/18, but I can't work out if I should put the full £20,000 allowance into this, or put £16,000 into it and £4,000 into a LISA.
    Originally posted by resk
    You didn't mention whether you pay into your pension via salary sacrifice. If so, there would be less incentive to use the LISA, assuming you will not be pushed into higher rate tax in retirement. Instead, you could just divert more of your income into your pension and use some of the funds to supplement your income. Even if not, the pension could still win out since 25% can be taken tax free.

    Also, I'm sure it's covered somewhere but I can't figure out - if I contribute to a S&S ISA every year as I plan to do, does that mean I can't put money into an "investment" LISA in the same year i.e. I would have to take a "cash" LISA? Or can I contribute to both a S&S ISA and "investment" LISA in the same financial year? If it's the former, I'm not sure a LISA is right for me - I suspect I may be more sensible putting the full 20K per year into an S&S ISA.
    A LISA is a LISA - there are not S&S LISAs and cash LISAs (you may still be restricted as to what you can invest in by your provider). It is a separate type of ISA, so you can contribute to a S&S ISA and a LISA in the same tax year.
    • resk
    • By resk 18th Mar 17, 6:33 PM
    • 16 Posts
    • 8 Thanks
    resk
    You didn't mention whether you pay into your pension via salary sacrifice. If so, there would be less incentive to use the LISA, assuming you will not be pushed into higher rate tax in retirement. Instead, you could just divert more of your income into your pension and use some of the funds to supplement your income. Even if not, the pension could still win out since 25% can be taken tax free.


    A LISA is a LISA - there are not S&S LISAs and cash LISAs (you may still be restricted as to what you can invest in by your provider). It is a separate type of ISA, so you can contribute to a S&S ISA and a LISA in the same tax year.
    Originally posted by masonic
    Brilliant, thanks for the input. My employee pension contributions are deducted from my gross monthly pay - in other words I get tax relief at source. Currently my strategy is to maximise the £40,000 annual allowance, get the money into the pension and (hopefully) growing there. I am assuming that I won't be a higher rate tax payer in retirement as I don't plan to work, and I doubt I'll have any income outside my pension (I was toying with the idea of going down the BTL route but recent changes by the government have put me off). I might still go for the LISA in addition to the S&S ISA, starting in 2017/18. That's assuming I can get this flat sold....
    • Plus
    • By Plus 18th Mar 17, 11:05 PM
    • 220 Posts
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    Plus
    Do I understand it right that this is the logic for contribution allowances for 2017/18? If we label:

    H = contribution to HTB ISA (max £3400 = £1000 lump + £200pm)
    L = contribution to LISA (max £4000)
    I = contribution to IFISA
    S = contribution to S&S ISA
    C = contribution to non-HTB cash ISA

    Then am I right that:
    H+L is less than or equal to £4000.
    Either C=0 or H=0 (cash or HTB but not both)
    (H+L)+C+I+S are less than or equal to £20000
    ?

    I had a look through the Savings (Government Contributions) Act 2017 but it wasn't the easiest to read...
    • bowlhead99
    • By bowlhead99 19th Mar 17, 1:43 AM
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    bowlhead99
    H+L is less than or equal to £4000.
    Originally posted by Plus
    As I understand it, the original intention was that L cannot get more than £4000 of money from any one tax year and so if you put 2017/18 money into your H and transfer it into your L during 2017/18, that will reduce the amount of remaining capacity for direct L contributions in the year - for example £2400 or £3400 of H contributions transferred into L would mean only £1600 or £600 of direct H contributions on top.

    However, if you do not want to do a transfer to move your H into L, and keep them as two separate pots, your H contributions would not affect L contributions and you could do the full £4000 into L. But people can only use L or H to buy a property, and as L allows more per year and has a higher cap on property value outside London, most people would be looking to do that transfer, unless they were planning on buying before April 2018.

    If there's now a finalised version of a new government pronouncement released in the last few weeks to which you're now referring, I haven't had a chance to read it yet, so you can disregard my comments if you've read it and what I've suggested is wrong due to me working on old info.

    Either C=0 or H=0 (cash or HTB but not both)
    An H is a special type of C. H is not a separate main category. The only categories are C, S, I, L and you can have maximum one of each containing current year money. As such, you would think that you can only have C or H but not both, as you say.

    However, there are some providers which are happy to allow you to have more than one cash ISA product with them containing separate tranches of current year contributions and they will report it in aggregate as one big cash ISA to the taxman.

    For example if you had £5k to deposit into cash ISA products, you might want £2k on a one-year fix and £2400 in helptobuy and £600 easy access variable rate. Some providers which have the systems and procedures to handle the HMRC compliance (Nationwide being an example), would accommodate you doing that. But you couldn't then pick up one of the pots and transfer it into a different provider's cash ISA, because all current year cash ISA money must sit in one 'account' with can therefore only be with one provider (even if Nationwide are accommodative and put it in three products with one virtual construct being the reported 'cash ISA account')

    So, in practice, you can have an 'H' and a different non-H 'C' where they both have balances, in the special case where they are with the same provider, and that provider is set up to allow it.

    (H+L)+C+I+S are less than or equal to £20000
    Correct. £20k of new 2017/18 money can be deposited.

    Transfers of existing money are allowed - within individual product limits, and subject to the receiving ISA provider being willing to accept the transfer - without reducing the remaining part of the £20k allowance.
    • dfbefore30
    • By dfbefore30 20th Mar 17, 12:49 PM
    • 27 Posts
    • 98 Thanks
    dfbefore30
    Apparently Skipton building society are going to offer a cash LISA from June. Finally some good news!
    • NevvyC
    • By NevvyC 20th Mar 17, 1:20 PM
    • 37 Posts
    • 1 Thanks
    NevvyC
    H2B ISA vs LISA at this stage in the game
    Greetings all. Have literally just joined this forum as am at a loss for the best way to maximise my gains after reading the appropriate guides and having saved up enough to finally invest into a H2B ISA at the max start level (£1200)

    My aim is to save for a first-time property purchase. (Edit: and won't be looking to buy until May 2018 at the earliest...)

    My quandary is after reading all the information the best route of action to take....

    The advice for my aim is to open a H2B ISA ASAP, however, doing so today for example, would mean crossing over into the new tax year with the same ISA affecting the amount I could put into any LISA (as the minimum investment for a H2B ISA is £1600 before any bonus ... 1200 today; 200 in April; 200 in May) and moreover, the information is getting confusing as to what bonus I would eventually realise from merging the two : so how can the best advice be to open an H2B ISA ASAP ?

    In the guides it states you can use one bonus or other (ie. 25% on H2B or 25% on LISA with the latter being the more generous bonus if you maximise...) so why bother opening up an H2B ISA now rather than just waiting until April 6th and getting that LISA clock ticking with £1 at the very least and utilising a 'regular saver' account such as Nationwide's 5% (allows £500pcm pay-in; and then when this hits the 4K mark transfer the lot across to the LISA ...)

    In summary, I'm at a loss as to what figure bonus I'd see towards a first-time property on opening a H2B now with the max 1200 & paying in 200 next month and month after to hit the minimum £1600 required for H2B bonus + then transferring into LISA (thus using 1600 of the 4K allowance for the year and judging from the guide meaning I'd miss out on either one of the 25% bonus ?) vs. just using a 5% regular saver account and then dumping that directly into the LISA when it hits the 4K mark ... Why is the best advice to open a H2B now if I'm not going to see a bonus from it if I transfer to (the more generous) LISA when available ?

    Hope that makes sense and thanks in advance for any light shed!
    Last edited by NevvyC; 20-03-2017 at 4:27 PM.
    • masonic
    • By masonic 20th Mar 17, 6:11 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    Why is the best advice to open a H2B now if I'm not going to see a bonus from it if I transfer to (the more generous) LISA when available ?
    Originally posted by NevvyC
    Because you are wrong about not seeing a bonus on the transferred funds. You will get a bonus on any money paid into the HTB ISA by 5th April and transferred to the LISA in addition to the bonus on up to £4000 paid into the LISA.

    But you certainly could use a 5% regular saver to build up a lump sum to be dumped into your LISA at the end of the next tax year.
    • NevvyC
    • By NevvyC 20th Mar 17, 7:11 PM
    • 37 Posts
    • 1 Thanks
    NevvyC
    Because you are wrong about not seeing a bonus on the transferred funds. You will get a bonus on any money paid into the HTB ISA by 5th April and transferred to the LISA in addition to the bonus on up to £4000 paid into the LISA.

    But you certainly could use a 5% regular saver to build up a lump sum to be dumped into your LISA at the end of the next tax year.
    Originally posted by masonic

    Thanks for your reply


    But you only see the H2B bonus when it has hit the £1600 threshold..... ?

    (With all this information and different stipulations flying around) it gets confusing...!

    Stay with me here -- but the gov bonus is only active when the H2B has reached the minimum £1600 required (earning a £400 bonus) -- ergo, the earliest I could achieve that now would be May, ie. after the April deadline

    (For instance: 3 deposits MIN ... If I were to open the H2B tomorrow, maximise using the 1200 by end of March; 200 1st of April; 200 1st of May)

    ....unless the H2B 25% bonus would be paid on just the first £1400 (or 1200 depending whether I made the 2nd deposit prior to or after April 5th) ... regardless; so long as I wait until the H2B balance reaches £1600 before transferring - I'm golden, is that accurate ?

    (Essentially whatever amount deposited into H2B prior to end of tax year sees bonus, even though you wait until it hits the £1600 figure to transfer to LISA & leaving me with the remainder of 3800 / 3600 allowance to add - depending on when I make deposit 2 in April) and also then see 25% bonus on the balance (up to 4K point) in the LISA (even though the balance may be for example £5600) after year1

    Would I be correct in saying that ?


    I also rang Barclays (best H2B rate currently) after posting my first comment and they seem to contradict what I've read on the MSE guides (they said that the H2B allowance wouldn't infringe on the LISA allowance if transferred in the same tax year, and in theory; to that effect I could continue to add £200pcm to a H2B and transfer the entire balance over to a LISA at the last possible point in time ie. the 1year deadline to merge the two, so say Feb 2018 and then still plunge 4K into the LISA ...AS WELL in March 2018 !?)

    Would definitely use the regular 5% saver in conjunction then and any funds at the end of the year in that could be transfered to the LISA...
    • masonic
    • By masonic 20th Mar 17, 7:33 PM
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    • 6,273 Thanks
    masonic
    But you only see the H2B bonus when it has hit the £1600 threshold..... ?
    Originally posted by NevvyC
    That's correct about the HTB ISA bonus. However, you are looking to transfer into a LISA and get the LISA bonus where no such limit exists.

    Stay with me here -- but the gov bonus is only active when the H2B has reached the minimum £1600 required (earning a £400 bonus) -- ergo, the earliest I could achieve that now would be May, ie. after the April deadline
    You can only get the bonus on the HTB ISA if you do not transfer into a LISA.

    ....unless the H2B 25% bonus would be paid on just the first £1400 (or 1200 depending whether I made the 2nd deposit prior to or after April 5th) ... regardless; so long as I wait until the H2B balance reaches £1600 before transferring - I'm golden, is that accurate ?
    You do not need to wait until the balance is £1600 before transferring.

    I also rang Barclays (best H2B rate currently) after posting my first comment and they seem to contradict what I've read on the MSE guides (they said that the H2B allowance wouldn't infringe on the LISA allowance if transferred in the same tax year, and in theory; to that effect I could continue to add £200pcm to a H2B and transfer the entire balance over to a LISA at the last possible point in time ie. the 1year deadline to merge the two, so say Feb 2018 and then still plunge 4K into the LISA ...AS WELL in March 2018 !?)
    There is no point in doing this as you can just put the money directly into the LISA. Any money you pay into the HTB ISA in the next tax year will come out of the £4000 allowance.
    • darren72
    • By darren72 20th Mar 17, 7:34 PM
    • 1,008 Posts
    • 203 Thanks
    darren72
    I usually put the maximum allowed into an ISA on the first day of the new tax year, can I do this for the full £20,000 and then transfer £4,000 over to a Lifetime ISA when more places start offering it? - Or would I need to keep £4,000 out of any type of ISA beforehand ?
    • masonic
    • By masonic 20th Mar 17, 7:38 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    I usually put the maximum allowed into an ISA on the first day of the new tax year, can I do this for the full £20,000 and then transfer £4,000 over to a Lifetime ISA when more places start offering it? - Or would I need to keep £4,000 out of any type of ISA beforehand ?
    Originally posted by darren72
    You could use the full allowance and then transfer. But couldn't you get a better rate outside of an ISA?
    • darren72
    • By darren72 20th Mar 17, 7:40 PM
    • 1,008 Posts
    • 203 Thanks
    darren72
    You could use the full allowance and then transfer. But couldn't you get a better rate outside of an ISA?
    Originally posted by masonic
    Thank you. Yes, but I'm hoping by building the amount I have in my ISA up when rates do improve in the future I will have a substantial amount in there (as lost years cannot be got back).
    • masonic
    • By masonic 20th Mar 17, 7:45 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    Thank you. Yes, but I'm hoping by building the amount I have in my ISA up when rates do improve in the future I will have a substantial amount in there (as lost years cannot be got back).
    Originally posted by darren72
    That's what flexible ISAs are for
    • skipfeeney
    • By skipfeeney 20th Mar 17, 10:32 PM
    • 57 Posts
    • 3 Thanks
    skipfeeney
    What assurances are there that you can withdraw at 60?
    Hi,

    What is the likelihood of the government increasing the age you can withdraw the LISA. I could potentially use it as a bridge between 60 and my pension age but I am worried the Government will move the goalposts and say perhaps in future it can't be taken out until 65 for example?


    Thanks
    • greenglide
    • By greenglide 20th Mar 17, 10:59 PM
    • 2,862 Posts
    • 1,838 Thanks
    greenglide
    That is what pensions are for?

    It is intended that the earliest date will move up from 55 and track the State Pension Page less 10 years. It could be that the LISA and pension date could align at SPa plus 10?

    All guesswork.
    • NevvyC
    • By NevvyC 20th Mar 17, 11:47 PM
    • 37 Posts
    • 1 Thanks
    NevvyC
    That's correct about the HTB ISA bonus. However, you are looking to transfer into a LISA and get the LISA bonus where no such limit exists.

    I was under the impression you could benefit from both bonuses ... Otherwise why is it beneficial to start a H2B ISA this late in the day (as MSE suggest as best practice still...) when I could just use the more generous LISA ?

    You can only get the bonus on the HTB ISA if you do not transfer into a LISA.

    :S In your original reply you posted : "Because you are wrong about not seeing a bonus on the transferred funds. You will get a bonus on any money paid into the HTB ISA by 5th April and transferred to the LISA in addition to the bonus on up to £4000 paid into the LISA." ?

    You do not need to wait until the balance is £1600 before transferring.

    The only reason I would wait to reach this figure would be to meet the threshold required for the gov bonus (which I thought you could benefit from coupled with the LISA bonus... Otherwise, like I said above; why bother starting a H2B ISA this late in the game...?)

    There is no point in doing this as you can just put the money directly into the LISA. Any money you pay into the HTB ISA in the next tax year will come out of the £4000 allowance.

    This is what I mean; that's contradicting what the Barclays Customer Service Rep has told me today ... (Which I thought seemed strange and your point seems more likely / accurate) I'm trying to maximise my gains but getting conflicting advice making it difficult to make a decision...

    So returning to my original quandary -- what IS the point in opening a H2B ISA this late in the day when I could just wait for the LISA (and supplement it using a lump sum from a regular saver account at the end of the year...) if any money paid into the HTB in the next tax year counts towards the 4K allowance anyway ?

    I'd be looking at doing one or the other if I cannot benefit from a bonus from BOTH now that it's this late in the tax year ... (No point running the two if I don't see a bonus from each?!) The reason I would have done it this way though would have been to accrue the interest in the H2B ISA (2.27% best rate with Barclays currently) before using it to lump into a LISA at last possible opportunity making my money work harder for me (and also, as I assumed, releasing the gov bonus from each...)

    .
    Originally posted by masonic
    Appreciate your replies (EDIT: sorry I couldn't figure out how to do the quoting properly!)
    Last edited by NevvyC; 21-03-2017 at 9:01 AM.
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