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

Flobberchops

masonic wrote: »

For someone in your shoes, it would be worth running both schemes in parallel for as long as you can.

I'm starting to come to the same conclusion: use the HTB ISA as a Regular Saver, and the Lifetime ISA for actually buying a house.

Is it confirmed that the LISA *isn't* a cash ISA and can therefore be subscribed to alongside a HTB?

masonic

Flobberchops wrote: »

Is it confirmed that the LISA *isn't* a cash ISA and can therefore be subscribed to alongside a HTB?

It definitely isn't a cash ISA because you can hold S&S in it. The way it has been described so far, it is not a "type" of ISA at all but a separate product that will also share the ISA subscription limit.

diamonds

masonic wrote: »

As far as we know, the current rules applying to HTB ISAs will not change, although there have been hints the scheme will be phased out earlier than expected and rolled into the lifetime ISA scheme. You will not get any bonus on this unless you buy a house with it.

For the lifetime ISA, there is no need to buy a house, but you must otherwise hold until you are 60 in order to keep the bonus (which is added every year on any money you have contributed that year). You'll get this regardless of whether you have the HTB ISA (for now anyway).

For someone in your shoes, it would be worth running both schemes in parallel for as long as you can.

I'm going parallel for as long as, I should not lose out because my main objective is buying a house, I dont work full time so the pension base of LISA does not attract me for now or the foreseeable, that may change but it certainly wont until after I buy. My state pension is protected for now and I certainly think paying into a proper pension has more credit to it than LISA pension value/s, well until we know more.

Besides if medical retirement comes early which it will at some point I can see a pension plan giving more flexibility to early medical retirement claim than LISA that states terminal illness payout, which unsurprisingly will save DWP paying out benefits for those terminal and over the savings threshold for DWP benefits, thus LISA should be used as HTB because a pension should cover medical retirement and not just a 12 month death period of the withdrawl payment.

The fact Tories think its acceptable for the DWP to not payout ESA or disability premiums because someone has saved a little and got the tax back and forfeit DWP assistance when dying is a very poor show, £6500 (current full ESA Support Group rates) over the full last 12 months of life for a dying person is a lack of humanity, it will prob cost the NHS 3/4 minimum times that amount for 12 month period excluding palliative care.


I see absolute very little bonus on LISA for few people for a retirement pot where the same amounts paid into a proper pension over a long term (I have 20+ years until 60) the paid bonuses over the same period in a real pension pot is very likely to be much more.



If you want a great pension train to be a teacher and take a job
in Canada.

jamesd

Flobberchops wrote: »

Is it confirmed that the LISA *isn't* a cash ISA and can therefore be subscribed to alongside a HTB?

Qutes from the various official documents:

"People can continue to open a Help to Buy: ISA until November 2019, as planned. They can also choose to open a Lifetime ISA, but will only be able to use the government bonus from one of their accounts to buy their first home"

"Help to Buy: ISA will be open for new savers until 30 November 2019, and open to new contributions until 2029. Savers will be able to save into both a Help to Buy: ISA and a Lifetime ISA"

"Savers will be able to contribute to one Lifetime ISA in each tax year, as well as a cash ISA, a stocks and shares ISA, and an Innovative Finance ISA"

jamesd

diamonds wrote: »

The fact Tories think its acceptable for the DWP to not payout ESA or disability premiums because someone has saved a little and got the tax back and forfeit DWP assistance when dying is a very poor show

It's savings like any other savings and so it counts towards means tests whether ill or healthy. The difference is that if you have a life expectancy of less than a year you won't lose the bonus and pay the penalty. If diagnosed with life expectancy of 18 months you're going to be required to pay the penalty until that life expectancy drops to no more than a year, unless you have other money to draw on.

If a person used the option to take pension money with a life expectancy of up to a year that money would also become savings and part of the means tests.

So far as I know none of the significant political parties has a different view on the way means tests work: if you have the money, you're expected to use it because the state is fallback, not bonus.

diamonds

jamesd wrote: »

It's savings like any other savings and so it counts towards means tests whether ill or healthy. The difference is that if you have a lie expectancy of less than a year you won't lose the bonus and pay the penalty. If diagnosed with life expectancy of 18 months you're going to be required to pay the penalty until that life expectancy drops to no more than a year, unless you have other money to draw on.

If a person used the option to take pension money with a life expectancy of up to a year that money would also become savings and part of the means tests.

So far as I know none of the significant political parties has a different view on the way means tests work: if you have the money, you're expected to use it because the state is fallback, not bonus.

The point being a pension can be paid on medical reasons excluding death and over a long period of 20 years minimum a pension can outperform the savings and government bonuses.

Those opening a LISA may also be fortifying a full or any state pension at a later date but you are not being told that at this point...any party can later use open and used LISA seen as a private pension for future tax and means tested reasons or use the balance and top up to the current state pension rate, save too much and you get no state pension, they just need to calculate the average age for both sexes death or average for both and after that age a state pension is payable if for X previous years you have not squandered your LISA.

Eventually LISA accounts en masse may get sold off...student loans anyone ?

Its almost a privatisation of the state pension, to you.

TOO MUCH relaying on a pension fund saving account, LISA seems great for HTB and nothing else, plan ahead 10 years for a mortgage with the government bonus but a fund to not then get your state pension you paid tax for...that would be bad financial planning and so not MSE.



Be interesting to see what HM Treasury via NS&I offer on LISA, if all.

jamesd

diamonds wrote: »

The point being ... over a long period of 20 years minimum a pension can outperform the savings and government bonuses.

Since the LISA can hold most of the same investments as a pension there is no reason to expect a difference in growth between the two.

diamonds wrote: »

save too much and you get no state pension

There is no such rule.

diamonds wrote: »

Eventually LISA accounts en masse may get sold off...student loans anyone ?

The money in a LISA or personal pension is yours and can't be sold off. You're free to move it whenever you like.

masonic

diamonds wrote: »

The point being a pension can be paid on medical reasons excluding death and over a long period of 20 years minimum a pension can outperform the savings and government bonuses.

There are provisions for other exceptions (beyond buying a house) to be added to enable people to access the money including bonus. Medical reasons might therefore be allowed.

The advantages to using a pension instead of a LISA are: salary sacrifice, employer contributions and higher rate tax relief. So a pension may give you a bigger initial bonus, but as jamesd says, you'll have largely the same choice of investments as you would in a pension - probably a better choice given the limited selection of funds available in most personal pensions.

Eventually LISA accounts en masse may get sold off...student loans anyone ?

Its almost a privatisation of the state pension, to you.

The accounts will be operated by the banks. The only reason they'd be sold off to another bank is if the original bank failed (like what happened with the Icelandic bank Kaupthing).

This could well be the beginning of something designed to replace (in full or in part) the state pension.

diamonds

jamesd wrote: »

Since the LISA can hold most of the same investments as a pension there is no reason to expect a difference in growth between the two.

There is no such rule.

The money in a LISA or personal pension is yours and can't be sold off. You're free to move it whenever you like.

But the age of state retirement and LISA differ, for now... the state pension is on the way out, LISA seems like a move in that direction, those who have bought property already so may find LISA is life current pension rules, pull cash out pensions now at circa 60ish but with LISA you loses bonuses at 60.


Rules can change, given LISA is being treated as a private state funded pension topup already from conception.


The government can outsource or sell off any asset it owns, LISA is state owned in part, that bonus and 5% fee is not going to charity thus it can be sold off, fully privatising your private state pension fund (and possibly in future barring you from public state pension), you cant really plan easily any pension as governments keep changing the rules, but it is much easier to change their own rules with LISA bonuses, terms, exclusion for other government means tested finance and future effect on a private public pension such as LISA, which give them that.


For the disposable income rich LISA is fantastic, for the less who will have to budget hard to put in its a poor pension but a great HTB. Its a budget smoke and mirror trick.

jamesd

diamonds wrote: »

the state pension is on the way out

No significant political party has any proposal to abolish the state pension and the current one while in coalition introduced the triple lock that has increased its value. Please cut out the baseless scaremongering.

diamonds wrote: »

The government can outsource or sell off any asset it owns

A government can also seize all private property in the UK but that isn't going to happen either.

diamonds wrote: »

LISA is state owned in part, that bonus and 5% fee is not going to charity thus it can be sold off

Money in a LISA can be withdrawn at any time. A government can't usefully privatise something that has nothing in it. If you want to scaremongering, pick pensions where you can't just take out the money at any time until age 55, but even there you can currently use QROPS to move the pension abroad.

diamonds wrote: »

for the less who will have to budget hard to put in its a poor pension but a great HTB.

Yes, it's not the best choice for those with a low expected income in retirement because they will get pension tax relief but pay no income tax on the way out under current personal allowance rules.