existing save to buy isa and/or new help to buy isa

seanhb

Official MSE Insert:

You may also find our fully researched Help to Buy ISA guide helpful.

Back to the original post...


my daughter already has a 'save to buy isa' with nationwide bs. She also wants to take advantage of the new h'elp to buy isa' where the gov gives a 25% bonus to savers. But she is unsure if she can continue to pay into the existing scheme as well, or at least till the new scheme start till Oct. stopping the current scheme without the new one being available is a risk and loss of interest potential. Nationwide had little info on the subject, can anyone advise further?

TCA

Nobody can advise until we know for sure that help-to-buy ISAs will be introduced and rules and regulations are published.

seanhb

That would generally be fine, but MSE advised recently current ISA holders should not deposit after 6/4, if they wanted to open a new gov supported help to buy isa. Thus those with a current save to buy isa are left in limbo; can't contribute their old isa, can't start a new isa till Oct. what is urgently required is confirmation if existing save to buy isa's can be transferred to the new scheme, or least they can continue to contribute to the old scheme without penalty, whilst a decision is made.
The Gov making such a later announcement has created this confusion.

bowlhead99

seanhb wrote: »

The Gov making such a later announcement has created this confusion.

That's clearly true. However it is probably going to work out no worse for you than if they had said they would introduce them on 6 April 2016 to give you more time to plan rather than give you the opportunity to contribute in 6 to 8 months time. And while it might sound obvious, you're not losing out compared to those of us who don't get the free money at all

If it were me I might just make the minimum £50 contributions to the nationwide ISA scheme that you're currently in, with the hope that they offer a new product when launched which can coexist alongside it. The government are hardly likely to say that putting £2k in the new help to buy ISA is going to completely block you having any other cash ISA this year, while homebuyers are one of Nationwide's main customer types so if the government allow a special homebuyers' incentive, Nationwide know they are going to have to make a version available to avoid losing those customers to rivals who do.

Or if you're nervous about it you could always open the non ISA version of the Nationwide save-to-buy product and close your existing ISA version of it.

TCA

Is the proposal not that you'll have 4 years to open a help-to-buy ISA? As opposed to when they commence, you'll only have 4 years to contribute. The bonus being capped anyway, would just mean you just lose a few months until next tax year, if you're not permitted to subscribe to this as well as a cash ISA. Admittedly I might have made that up.

seanhb

I believe you are correct, 4 yrs can start anytime. Thus probaly best to continue to deposit in current save to buy, and start a help to buy in 2016. However it would be best to get the help to buy started asap, to ensure you get the full 4 years in or close. Maybe why did MSE posted the alert warning not to contribute after 6/4/15. Year one allows a one off £1k deposit, which could be considered a 5 months catchup for the late start.
Best outcome is that save to buy can be transferred to help to buy, or part of it. And/or you are allowed to have both. Seems like a good government idea, but not thought through properly (rushed out for vote winning purposes?)

TCA

Your ISA wouldn't have a 4 year life - the 4 years is how long the proposed scheme will remain open for people starting a help to buy ISA. There is a maximum monthly investment and a maximum amount that will receive the bonus. i.e. £12,000. But you don't have to put the maximum in every month to achieve the full bonus within a specified timeframe. There's no time limit as to how long you can save in one.

This might help if you haven't seen it:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413899/Help_to_Buy_ISA_Guidance.pdf

seanhb

Thanks, the link was very useful. Overall my conclusion is to carry on with any isa savings products until the new scheme commences. Then consider if you can start in 15/16, or have to wait till 16/17. Not suspend current isa savings till this scheme starts, as per MSE advice.

bowlhead99

seanhb wrote: »

Thanks, the link was very useful. Overall my conclusion is to carry on with any isa savings products until the new scheme commences. Then consider if you can start in 15/16, or have to wait till 16/17. Not suspend current isa savings till this scheme starts, as per MSE advice.

MSE gave some basic advice to avoid people messing themselves up, but then added some useful small print, which I've copied below.

As you've seen on the gov't document, it warns "As is currently the case, it will only be possible for a saver to subscribe to one cash ISA per year. It will therefore not be possible for an account holder to subscribe to a Help to Buy: ISA with one provider, and another cash ISA with a different provider." So you can see why the MSE comments are the way they are, in terms of prioritising catering to the masses with a one size fits all answer and then allowing others to pick through the potential small print.

You would probably presume that Nationwide are going to offer a product within their range that can sit along another Cash ISA for the same year - they currently allow you to employ a similar concept to hold both instant-access and fixed ISAs within current year's subscriptions for example. But if you fear Nationwide might not play ball and your buying timescales make it important to you to definitely get the gov't money this year rather than next, then you will practically lose nothing by putting the next 6 months of savings into a high interest current account instead of lowish rate savetobuy ISA, and use the non-ISA version of the savetobuy instead to keep that benefit available.

MSE article below.

Q. Does it mean that if I open a cash ISA after 6 April I can't open a Help to Buy ISA until the tax year after that?

A. Yes. If you put money in a cash ISA in a tax year (even an existing one), you can't open a Help to Buy ISA. So be careful not to do that and be especially careful if you have a direct debit contributing to a cash ISA as it would automatically be set up.


Is there any way around this?


We've told you the safest explanation. However, if you know what you are doing here are five ways you MAY get around it:

1. Put money in a cash ISA and close it down, leaving you to open a Help to Buy ISA later.
2. Save into a cash ISA beforehand and transfer it in to a Help to Buy ISA - but you'll only be able to transfer £1,200 when you open it (the max £200 plus the additional £1,000), so you'll need to make sure you won't save more than this, as partial transfers between current year's ISAs aren't allowed.
3. If we assume that maxing out your Help to Buy ISA for the 2015/16 tax year would allow you to save £2,200 (ie, assuming it launches in October, that's £1,200 upfront then five months of £200). Then you could could put the remaining £13,040 allowance into a stocks & shares ISA but keep it as cash, which some providers allow you to do (see stocks & shares ISAs) - once the next tax year starts you are allowed to transfer it into a cash ISA.
   
   Yet as cash within stocks & shares ISAs usually has no or very low interest - you wouldn't want it in there for long. So this would be best to do in late March 2016, only for those who will max out their ISA allowance each year. Saying that, if you did this and then started to deposit new money int your cash ISA you will not be able to contribute to the Help to Buy ISA that tax year.
4. Or, you could open a cash ISA with the £13,040 at the start of the year. Then just before you open the Help to Buy ISA, you can transfer the cash into a stocks & shares ISA. The money's reclassified as stocks & shares ISA money leaving you free to open a cash ISA, which is a Help to Buy ISA in this case.
5. Some ISA providers already allow you to split your cash ISA allowance between easy-access and fixed accounts, so it's possible that some providers could offer a split between the Help to Buy ISA and the normal cash ISA, allowing you to save your full £15,240.
   
   However, we don't know yet if that will be possible with Help to Buy ISAs, and even if it is, providers may choose not to offer it.