Lifetime ISAs guide

anewman

tinker45 said:

Hi Folks,
If I open a LISA now (to start the 1 year clock ticking) but I don't put any money in until say, March (so as to align with the end of the tax year but also means I know better if I will buy before the 1 year minimum) - would I still get the full government bonus?
Naturally I know I won't get the interest, but trying to understand, if the bonus is paid out in chunks or if I invest the full annual amount right at the end of the tax year if I simply get the full bonus too?
Similarly, if I know for sure we will buy after the 1 year mark and say I  put in 4k in March (this tax year) and 4k in April (next tax year) would I quite quickly have the full bonus?
Thanks!

Don't forget that interest is earned on the full balance, including the bonus once added.

eskbanker

anewman said:

rachlikeswinter said:
Aye - if you've got the cash available now and it's not tied up or earning mega bucks interest elsewhere, I'd probably whack it in sooner rather than later tbh. Getting the bonus is a lovely serotonin hit which we all need right now!

If you might need the money for an emergency, it's better not tied into the LISA, though. Penalty free withdrawals will end next year.

Penalty-free withdrawals won't end as such, but penalties on non-qualifying withdrawals will revert to 25% rather than the temporary 20% - even though the latter effectively results in no net loss (compared with initial contribution), it's still a penalty (from the prevailing balance at the time).

jej_SE15

My impression is the Lifetime ISA market is completely dysfunctional. I thought I'd post about my experience to caution other or to see if anyone had advice on a solution. I opened a cash Lifetime ISA  about 3 years ago with Moneybox before I was 40. At the time, there were only a couple of providers on the marker.  I am now over 40 and am free to continue adding to the Moneybox cash Lifetime ISA.  However, bizarrely, they do not even accept transfers between their own cash Lifetime ISA and their stocks and shares Lifetime ISA. "There system doesn't allow it," they tell me. There are very few other providers: Nottingham BS and AJ Bell do not allow transfers from people over 40 even though they have existing LISA accounts. As far as I can see, Hargreaves Lansdown do not allow Lifetime ISA transfers at all - they are not listed on their transfer form.  If someone knows to the contrary, please tell me.
With a 25% annual bonus, the cash Lifetime ISA is probably still a fairly good option until I am 50, but with no option to transfer, I have to accept whatever interest rate Moneybox offer.  Inevitably, that rate is going to decline (it's only 0.6% now) if there is no risk of customers transferring the money to an alternative provide.  I can only get the 25% bonus until I'm 50, but the money will be in the account until I'm 60, meaning 10 years of earning almost nothing.  Personally, this seems to be a good time to move to a stock and shares Lifetime ISA, but it just doesn't appear to be possible.
Does anyone know any provider that does accept transfers form people over 40?  If not, the system is clearly anticompetitive. I can't believe the government wants the system to operate like this, and it seems highly uncompetitive, but how can we force banks to accept transfers from people over 40?

eskbanker

The issue of over-40s not being able to transfer was discussed in this thread last week: https://forums.moneysavingexpert.com/discussion/6205505/over-40-and-wanting-to-transfer-a-lisa

jej_SE15

I have now confirmed that Hargreaves Lansdown are not excepting any LISA transfers at all and neither are Nutmeg.  As things stand, if you are over 40 with a LISA you it seems you are stuck with your current provider.  As time passes, there's going to be an increasing amount of people and saving in this situation.  Hopefully, that will put pressure on providers to allow transfers, but at the moment its a very disappointing situation. LISAs were set up by the government, and I feel they have a responsibility to consumers make sure the market is functioning properly.

jg1995

Im looking to buy in London.
The new HTB equity loan scheme in London states max 600k however LISA state max 450k. Can you use them both if you are looking to buy a property over 450k? 

grumiofoundation

jg1995 said:

Im looking to buy in London.
The new HTB equity loan scheme in London states max 600k however LISA state max 450k. Can you use them both if you are looking to buy a property over 450k? 

No - you can use the schemes together but the property must fulfil the criteria of both schemes. So in this case limited by the LISA limit of £450k.

johnwash

Hello. This question may have been asked before so apologies if I'm duplicating! I have a question about the 12 month timeframe for being able to use a LISA penalty-free. I opened up my first LISA (Skipton) in March 2018, and paid in the maximum. I then opened up a Newcastle LISA in March 2019, paying the maximum into it in March 2019 and March 2020. In October 2020 I transferred both these LISAs into a Moneybox LISA. When does the 12 month countdown start? Both MSE and a couple of other websites state that this would start from my first LISA opening in March 2018 - but other websites, including some companies who offer LISAs, state that the 12 month countdown starts from when I opened the specific LISA - so in this case, October 2020. The official government website is a little ambiguous on this. Does anyone have any more knowledge or experience in this regard? I've already asked Moneybox and awaiting a response from them.
Likewise, assuming that I can still use the money penalty-free, if I then pay in the maximum £4000 in March 2021, and another £4000 in say May 2021, and want to use it and the associated bonuses for a house purchase in say July 2021, this will all be allowed?
Many thanks.

masonic

When one LISA is transferred into another, the registered opening date becomes the earlier of the two constituent registered opening dates. July 2021 should not be a problem, even if the Newcastle one was transferred in second and someone messed up and overwrote the Skipton date with the Newcastle date.

Alexland

johnwash said:

Likewise, assuming that I can still use the money penalty-free, if I then pay in the maximum £4000 in March 2021, and another £4000 in say May 2021, and want to use it and the associated bonuses for a house purchase in say July 2021, this will all be allowed?

It might be a bit tight to have received the bonus relating to the May contribution if added after the 5th. The LISA manager identifies all new contributions between the 6th of the previous month and the 5th of the current month and claims the bonus and then when the government have paid them distributes it into the customer accounts. This process takes around 3-4 weeks sometimes longer so the bonus should be in the account towards the end of June or early to mid July

If you really wanted to buy before the final bonus was received that's not a problem as you could then transfer the £1k Cash LISA account to a S&S LISA and continue contributing to it in future tax years towards age 60+