2016 Budget - ISA changes

jamesd

Cisco001 wrote: »

So is it mean that one person can only held one lifetime isa?

No. You can have as many as you like but as usual only one can hold current year money.

Cisco001 wrote: »

Let say this year 1, you open lifetime isa in bank a. Put 4000 in. You end up 5000 + interest.
Year 2, could u open new lifetime isa with bank b and keep bank a account open?
Let's say u can open another lifetime isa in bank b, again max out.

All fine so far.

Cisco001 wrote: »

Unfortunately, in year 3, you need to withdraw. I assume it is only allowed by closing. Say you close bank b. Will it affect the bonus in bank a?

You do not have to close. You pay the 5% only on the amount withdrawn. Other accounts/amounts are not affected.

Cisco001 wrote: »

And how about one start saving really young and manage to max out. What happen when they reach £75k limit? Is the money protected?

Use multiple accounts. The limit may be 50k not 75k if investment options are used instead of deposit accounts.

jamesd

Jonnybgood wrote: »

Does this mean I could pay in the full £4000 during the first month of a tax year, then withdraw immediately to buy my first home and receive the 25% on that 4K?

Yes. No time limit other than the initial twelve months requirement.

masonic

smichr wrote: »

I'd understood it as 25% every year, am I wrong?

Ie year 1, £4000 from me + £1000 bonus = £5000, year 2, total £10,000 etc?

You are not wrong, but the point juststuff123 was making was that you only get the 25% once on each tranche of money contributed. When some of the money might be tied up in the account for 20-35 years, the actual return on the money after that will outweigh the bonus, so it's important to make sure the return is actually going to be competitive. 25% spread over 20 years works out at just 1.1% annualised and over 35 years, just 0.6%.

gwapenut

masonic wrote: »

I wouldn't say weird, I'd say ominous. Perhaps those who will be over 40 at the time this is launched will escape some terrible fate being plotted and yet to be revealed...

Couldn't agree more. I reckon this lifetime ISA signals the age cutoff at which a different form of pension will become mandatory in the future.

Glen_Clark

veryintrigued wrote: »

Building on the success of the Help to Buy:......

Apart from inflating housing costs and the National Debt, What success would that be?

DragonQ

Bit annoying that they've now changed the Lifetime ISA house price limit to £450k. If they did that from the start I could've taken advantage of my HTB ISA!

So once you're a homeowner, essentially this Lifetime ISA is a pension with a guaranteed return (25% + annual interest rate) and the option to withdraw the money for a fee if you really need it before you're 60?

Cisco001

jamesd wrote: »

No. You can have as many as you like but as usual only one can hold current year money.

All fine so far.

You do not have to close. You pay the 5% only on the amount withdrawn. Other accounts/amounts are not affected.

Use multiple accounts. The limit may be 50k not 75k if investment options are used instead of deposit accounts.

So what happen if on year 2, I didn't open another account in bank B, and keep banking in bank A.

When I need to withdraw in year 3, will I lost the bonus on year 1?

andyca

Cisco001 wrote: »

So what happen if on year 2, I didn't open another account in bank B, and keep banking in bank A.

When I need to withdraw in year 3, will I lost the bonus on year 1?

Are you talking about a partial withdrawal?

• If you withdraw £4 you will lose £1 in bonus (plus interest that £1 has accrued, and 5% of withdrawal amount)
  
• If you withdraw £4000 you will lose £1000 in bonus (plus interest that £1000 has accrued, and 5% of withdrawal amount)
  
• If you withdraw all of it you will lose all the bonus (plus interest accrued on government bonus, and 5% of withdrawal amount)

If you are asking if it's a first in last out system, I'm not sure. It would be slightly better if a partial withdrawal is assumed to be from last money paid in as you would get slightly more interest on any remaining balance (as the £1000 bonus is not applied until the end of the year and would have already been applied to earlier deposits) but the penalty for withdrawal is supposed to deter spending and encourage long term saving, if you are thinking about withdrawing the money before LISAs are available then you might be better off with another product.

The potential for borrowing against this sum will likely change all this in the future.

Cisco001

andyca wrote: »

Are you talking about a partial withdrawal?

• If you withdraw £4 you will lose £1 in bonus (plus interest that £5 has accrued, and 5%)
  
• If you withdraw £4000 you will lose £1000 in bonus (plus interest that £5000 has accrued, and 5%)
  
• If you withdraw all of it you will lose all the bonus (plus interest accrued, and 5%)

If you are asking if it's a first in last out system, I'm not sure. It would be slightly better if a partial withdrawal is assumed to be from last money paid in as you would get slightly more interest on any remaining balance (as the £1000 bonus is not applied until the end of the year and would have already been applied to earlier deposits) but the penalty for withdrawal is supposed to deter spending and encourage long term saving, if you are thinking about withdrawing the money before LISAs are available then you might be better off with another product.

The potential for borrowing against this sum will likely change all this in the future.

Yes, I am talking about withdraw.

The wording from the government seems to be if I withdraw before 60 and not for buying first home, I won't get bonus and interest related to it.

So my question is, when it say bonus, is it refer to the bonus on the financial year. Or all bonus from day one.

My first post is at #55

Let say this year 1, you open lifetime isa in bank a. Put 4000 in. You end up 5000 + interest.

Year 2, you open open another lifetime isa in bank b, again max out. i.e. £5000 + interest

Unfortunately, in year 3, you need to withdraw. Say £2000 from bank B. Will it affect the bonus in bank A?

jamesd comment that I only lost bonus at the account I decided to withdraw, i.e. bank B only. (although I am not entirely sure)

Then, another scenario is, on year 2, i did not open another lifetime isa in bank b, I keep put in £4000 in bank a with same account.

When it come to year 3 I need to withdraw, will this affect the bonus you earned on year 1?

Remember the wording from government is

"you can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this).
You will also have to pay a 5% charge"

mikjhaycock

(apologies if this has been asked already)


The ISA limit will increase to £20k in 2017/18


Q: If I choose to invest in the lifetime ISA - does the additional government top up contribute to this amount or not? I.e. If put in the full £4k and then the gov. adds the additional £1k does this actually equate to £5k of the ISA allowance? This would mean the maximum you could add would actually only be 19k should you invest in the Lifetime ISA.


If anyone has an answer to this one it would be helpful :-)


Thanks!
Mike