MSE News: Budget 2016: Lifetime ISA to launch with 25% state bonus for the under-40s

masonic

Dan83 wrote: »

So, from the details I have read so far (the link above) I see no reason why you can't put £4000 in for 12 months, get a 25% bonus (or what ever they call it) then with draw your £4000, pay the 5% fee (£200) and be £800 up, then repeat every year.

You lose the bonus, interest and pay a 5% penalty on the money withdrawn based on some of the things I've read (edit: and this is mentioned in the link above). Basically, before 60, you can only withdraw the capital you've paid in (except for a first time home purchase) and would effectively lose everything else.

Edit: The official Government document states that only interest accrued on the bonus is deducted, so it is actually loss of bonus (and associated interest) and a 5% penalty on the sum withdrawn.

Dan83

jamiecharlton203 wrote: »

Me and my partner have both just opened help to buy ISA's this week. But now we're confused, should we continue to save in the help to buy ISA and then switch this in 2017 to the lifetime ISA? if we do that does that mean we don't gain any bonuses for the money we would've saved over the next 12 months? and if we're planning on buying a home within the next 3 years will it be worth just sticking to the help to buy ISA and saving the max each month for 3 years and then taking the bonus from that account? sorry for all the questions but this is big news!

Probably best to keep paying into your HTB isa, there is an option to move it into a lifetime isa. When the lifetime isa comes out you can sit down and do the sums, thrn do what is best for you.

jamesd

coastline wrote: »

If payments can be added any time then this is an ideal savings plan for low paid and self employed people.?
For many they simply can't commit to regular payment plans so anything from £0-4,000 a year with a bonus is a nice little earner..
Even after 20 years you could build up a tidy sum paying in the maximum and that would be over £170,000 at 5% growth.

No, that's just about the worst group for this. The money is not protected from benefits means tests or insolvency so they could lose the lot. Many pensions are available that allow ad hoc payments and those are safer from those risks.

_CC_

This would have far more appeal for me if it didn't have the 5% withdrawal charge and instead you just lost the bonus. It would still encourage long term savings/investment due to the bonus, yet would offer the flexibility and tax efficiency of an ISA.

_CC_

masonic wrote: »

You lose the bonus, interest and pay a 5% penalty on the money withdrawn based on some of the things I've read (edit: and this is mentioned in the link above). Basically, before 60, you can only withdraw the capital you've paid in (except for a first time home purchase) and would effectively lose everything else.

You forfeit all the growth? I thought it was just the bonus and any growth on it...

masonic

_CC_ wrote: »

You forfeit all the growth? I thought it was just the bonus and any growth on it...

From the article:

You can take out money at any time, but if you do so before you're 60 and it's not for a home, you'll lose the state bonus and any interest earned. Plus you'll pay a 5% charge.

Edit: But from the official document:

1.112 The government proposes that savers can make withdrawals at any time for other
purposes, but with the bonus element of the fund plus any interest or growth on it returned
to the government, and a small 5% charge applied.

TrustyOven

coastline wrote: »

If payments can be added any time then this is an ideal savings plan for low paid and self employed people.?
For many they simply can't commit to regular payment plans so anything from £0-4,000 a year with a bonus is a nice little earner..
Even after 20 years you could build up a tidy sum paying in the maximum and that would be over £170,000 at 5% growth.

Warning: I've not had cofffee yet so brain is not at normal speed...

I've just had a realisation... how will those with low pay be able to make that much use of this?

On my previous job, earning about 27k before tax (so not low paid), my pension contributions of 5% were approx £117 per month. That's £1404 a year. And the employer matches...

Are those on low pay able to pay 5%+ in pensions? Judging by some of the posts in the Auto-Enrolment forum here, some are not even able to cope with the minimum 1% contributions... on lower pay.

Seems that they would never be able to approach the 4k annual limit of a LISA... Sure, they'd get 25% extra from the gov't, but they wont get anywhere near the 4k limit.

Are people getting unduly excited about this LISA?

kingrulzuk

What can stop the government to move the goal post?

cloud_dog

It does make me laugh (a little) because when the 'other' Government was offering free money to the young to encourage the benefits of savings it was baaaaad; now though its ok. Politics, eh.

adfegg

So, what happens when the bonus is paid out? Say I've been keeping £4000 in the account, and at the end of the year I get my bonus payment of £1000. But if I can only save up to £4000 in the Lifetime ISA, does this mean the bonus has to be paid into a different account?