Lifetime ISAs guide

Alexland

AJ Bell YouInvest launched their LISA a few months later.

Also in the news this week Moneybox launched their S&S LISA but I have not been able to verify you can apply as you would need to install their App etc and I can't be bothered as I don't really agree with their approach anyway and there are better choices.

https://www.moneyboxapp.com/lifetime-isa/

I would also avoid Share Centre - although a colleague has a Share Centre LISA and seemed happy with it. The fund fees are eye watering and not obvious when signing up so a bit misleading in my opinion. My colleague was left with the impression they were managing the investments for free and I can see how she got that impression.

AJ Bell is best for occasional lump sums and HL and Nutmeg are both good for regular contributions (no trade fee on HL funds or Nutmeg ETFs). Nutmeg is simplest but their business model is not currently profitable but you are protected by FSCS up to £50k.

As the pot gets bigger over multiple years AJ Bell is the clear winner on fees for holding single funds provided you don't keep switching - even if you are still doing regular contributions of new money as the £1.50 trade fees are more than offset by the lower platform fees on several years of existing money.

Again as the pot gets bigger if you move away from funds into Shares, Investment Trusts or ETFs then the AJ Bell fees are capped at £30 and HL at £45 plus stamp duty (if applicable, not on ETFs) and trade costs (which are cheaper on AJ Bell). Just remember that the LISA bonus arrives as cash and is not immediate and any dividends would also eventually need reinvestment so you need a strategy to keep trade costs down.

We are with Nutmeg and they are fine for the next 18 months but when we get to £15k (+hopefully growth) each we will probably switch to ETF/ITs with HL as we already have pension money linked to AJ Bell so want to spread risk across multiple platforms.

Alex

sbro1690

Hi all,

I have a question I was hoping someone could help me with regarding Lifetime ISA's.

Having read the information on the main website at the beginning of 2017 regarding LISA's and starting your LISA clock if you want to use the money to buy a house (which I do) I opened one of the only available ones at the time with the Share Centre, a S&S LISA.

I have now seen a cash LISA with Skipton Building Society and was considering transferring my LISA to a cash LISA with them. From my understanding this would be a fee of £25 from the Share Centre.

I also have a H2B ISA which I was going to move into my LISA to get the maximum bonus (obviously within the LISA limits of £4k each tax year).

My question is, do I need to change to a cash LISA in order to get the bonus for a house and then save for my retirement or can I do it all through my current S&S LISA. I haven't invested the money anywhere as I only opened it with the minimum amount in order to start my LISA clock.

I'm just so confused by it all.

Thanks in advance for any help.

Sarah

Alexland

Hi Sarah,

You can buy a property with the S&S LISA (by full or partial withdrawal) but the challenge is that you might want to make the purchase when the markets are low (or they may crash after you make your offer and before your solicitor draws the money). There is also the slight delay in selling the investments before the money can be drawn.

This is less of an issue if your purchase is many years away or you are investing in less volatile assets. With HL and AJ Bell you can sell your investments down to cash within the S&S LISA wrapper - can you do this with The Share Centre? Although you usually get no interest for cash in a S&S wrapper at least the money is safe again. Even with TSC cautious fund (at 1.69% ongoing fee!) there are lot of bonds which can be interest rate sensitive. If rates go up you could have a triple whammy of your LISA value reducing, your mortgage being more expensive and therefore being able to borrow less.

If you are looking to transfer in your HTB ISA talk to TSC urgently to confirm they are supporting this and the process (as I can't see it as an option on their LISA webpages). Some providers such as Nutmeg have declared themselves incapable of implementing this LISA feature in time.

Otherwise you will need to move your LISA to a provider that is supporting this (such as Skipton) and then instigate the transfer. The deadline for initiating a HTB transfer at Skipton is 1st march - only 2 months away so things could be very tight if you need to move the LISA first, do the HTB transfer and top-up to £4k after.

Agree it is confusing but if you can get your head around it and take the right actions (with the help of this forum) it should be very beneficial.

P.s. if saving for retirement also consider AVCs into your workplace pension especially if you are a higher rate taxpayer, your employer runs salary sacrifice (to save NI) or you could get additional employer matched contributions. Although it's tempting to do property first then pension you really need to get both on track in parallel. Appreciate this is really hard when you are first starting out in life but if you can do it the results will be amazing in the future.

Good luck

Alex

dansmif

Does anyone know if it's possible to open another LISA in the same tax year if you completely close the first one?

I opened a stocks and shares LISA with Nutmeg on 6th April 2017 and was planning on using it to save for retirement since I'm not a first time buyer, but I ended up closing it a few weeks ago as I needed the money for a house move. Thankfully the 25% penalty doesn't apply in the first year! I phoned Nutmeg to ask if I could open a LISA again with them early next year (before the next tax year starts) but their systems don't currently support re-opening a LISA (even if it's in a future tax year).

Could I potentially open a LISA with another provider such as Hargreaves Lansdown in say January 2018?

Dan

Alexland

HMRC rules are that you can only contribute to one LISA per tax year so if your LISA from this tax year was closed (unless it was manager error) you will have to wait until the next tax year starting 6th April 2018 to open a new one (with any LISA provider who has adequate IT systems) and make contributions. The new calendar year makes no difference whatsoever.

sb13

Hi,

Does anybody know if I would be able to use my LISA in conjunction with my partner and another couple? (2 males and 2 females all with their own LISA using savings for 1 first time property)

Just to be clear none of us have purchased a property previously or have any property under our names.

travelbug15

Hi,

I've read so many posts and comments about this and I think I've finally grasped it a bit re the transferring and bonus etc. However... I know April is crucial because of the tax year but I opened my LISA in August with a £1 (as Martin suggested) so that's ticking over. I currently have a H2B with £6k in, which I have been saving since Jan '16. If I transfer my H2B over to the LISA before 5 April 2018, will that still be okay for me re the bonus and allowance etc?

Also, does it make a difference that I opened the account in August? Does that just mean that I can't get the bonus until I've had the account for a full year (so would have to wait until August 2018 at the earliest to buy somewhere)?

Thank you in advance... I know these questions get a bit repetitive!

Katrina

eskbanker

KBSMITH15 wrote: »

I know April is crucial because of the tax year but I opened my LISA in August with a £1 (as Martin suggested) so that's ticking over. I currently have a H2B with £6k in, which I have been saving since Jan '16. If I transfer my H2B over to the LISA before 5 April 2018, will that still be okay for me re the bonus and allowance etc?

Yes, the annual LISA allowance is £4K per tax year but your pre-17/18 HTB money doesn't count towards this, so as long as your 17/18 HTB contributions plus whatever you've paid into the LISA are collectively below £4K then that's fine. Make sure you initiate the transfer in plenty of time for the end of the year - Skipton have imposed a deadline of 1 March for example.

KBSMITH15 wrote: »

Also, does it make a difference that I opened the account in August? Does that just mean that I can't get the bonus until I've had the account for a full year (so would have to wait until August 2018 at the earliest to buy somewhere)?

Once you've consolidated your HTB and LISA money before 5 April 2018, you'll receive 25% of that into your LISA by late April/early May 2018, after which you'll get a 25% bonus on any further contributions to the LISA but on a monthly basis. However, you won't be able to use the LISA (without penalty) until August, when it will have been open for a year, but that doesn't affect the bonus earning as such.

Alexland

sb13 wrote: »

Hi,

Does anybody know if I would be able to use my LISA in conjunction with my partner and another couple? (2 males and 2 females all with their own LISA using savings for 1 first time property)

Just to be clear none of us have purchased a property previously or have any property under our names.

Just checked the HMRC manual and there is no limit to the number of individuals using their LISA to purchase a single property provided all those using LISA individually and the property qualifies under the terms.

travelbug15

I'm new to this site so hopefully eskbanker gets my reply! Thank you for your help!

With regards to moving over the H2B to LISA...how do I go about that exactly? Is it just a matter of calling up my HTB provider in February and ask that it is transferred over before 1 March? How does that work with the 5 April deadline? Would I then just forget adding funds for March and April into my HTB and just start having them go straight to my LISA?

Sorry for all the questions!