Lifetime ISAs guide

P1Fanatic

Should be fine as more than a month until new tax year. If you stick £4k in now then another £4k on/after April 6th then you will get 2x£1k bonus. I would probably call up whoever you plan to open LISA with just to double check.

CSmithy1878

Afternoon All, 

I'm new to this forum so I apologise if this has already been asked earlier on!  

I started a Lifetime ISA 5 years ago and have, very fortunately, been able to save the maximum amount each year in it - £16,000 + £4,000 bonus.  

I started the Lifetime ISA with the intention of using it to help buy my first property.  Since that time life has changed and I now live with my ( now ) wife in her house which I am now named on the mortgage etc.  

My question is, should I carry on saving within the LISA to supplement my pension when I hit 60?  Or would it be more effective to close the LISA, take the hit of losing 6.25% of the sum within, and reinvest the money in a different savings account accruing Interest?  

Thanks all, 

Chris 

masonic

CSmithy1878 said:

Afternoon All, 

I'm new to this forum so I apologise if this has already been asked earlier on!  

I started a Lifetime ISA 5 years ago and have, very fortunately, been able to save the maximum amount each year in it - £16,000 + £4,000 bonus.  

I started the Lifetime ISA with the intention of using it to help buy my first property.  Since that time life has changed and I now live with my ( now ) wife in her house which I am now named on the mortgage etc.  

My question is, should I carry on saving within the LISA to supplement my pension when I hit 60?  Or would it be more effective to close the LISA, take the hit of losing 6.25% of the sum within, and reinvest the money in a different savings account accruing Interest?  

Thanks all, 

Chris 

You have three choices (1) continue paying into the LISA for use in retirement; (2) keep the LISA for retirement, but don't add any more to it; (3) cash it in subject to the penalty.

Which option is best depends on your circumstances. You may be able to get more tax relief by diverting your contributions to a traditional pension - there is a useful guide for that here: https://www.moneysavingexpert.com/savings/lifetime-isas/#retirement

It would generally only make sense to cash in if you will need the money before reaching the age of 60. If you choose to keep it or add to it, switching from a cash LISA to a S&S LISA would be advisable, since over the long term cash savings underperform investments.

Mcfaggen

I had somehow managed to miss that S&S LISAs were a thing. I’ve got four years full Cash LISA contributions but had been planning to save it for the full term & then waiting for it to be available to do something with after penalties were not applicable. 

Presume S&S LISAs have the same age restrictions? I can switch post-40? Are there fees involved at both ends if I switch (I.e. close the cash LISA= fee / open S&S LISA = fee)? 

masonic

Mcfaggen said:

I had somehow managed to miss that S&S LISAs were a thing. I’ve got four years full Cash LISA contributions but had been planning to save it for the full term & then waiting for it to be available to do something with after penalties were not applicable. 

Presume S&S LISAs have the same age restrictions? I can switch post-40? Are there fees involved at both ends if I switch (I.e. close the cash LISA= fee / open S&S LISA = fee)? 

There are no fees to transfer a cash LISA to a S&S LISA. S&S LISAs will have an investment management charge, as with any investment account (including pensions). In theory it should be possible to switch post-40, but in practice providers have not set up their systems to allow it, so as things stand over 40s with a S&S LISA are stranded with their current provider.

Mcfaggen

masonic said:

Mcfaggen said:

I had somehow managed to miss that S&S LISAs were a thing. I’ve got four years full Cash LISA contributions but had been planning to save it for the full term & then waiting for it to be available to do something with after penalties were not applicable. 

Presume S&S LISAs have the same age restrictions? I can switch post-40? Are there fees involved at both ends if I switch (I.e. close the cash LISA= fee / open S&S LISA = fee)? 

There are no fees to transfer a cash LISA to a S&S LISA. S&S LISAs will have an investment management charge, as with any investment account (including pensions). In theory it should be possible to switch post-40, but in practice providers have not set up their systems to allow it, so as things stand over 40s with a S&S LISA are stranded with their current provider.

Thanks. I’m in a Cash LISA, so would switching post-40 be unlikely then? My provider wouldn’t let me go & no one would want me to join anyways? 

eskbanker

Mcfaggen said:

masonic said:

Mcfaggen said:

I had somehow managed to miss that S&S LISAs were a thing. I’ve got four years full Cash LISA contributions but had been planning to save it for the full term & then waiting for it to be available to do something with after penalties were not applicable. 

Presume S&S LISAs have the same age restrictions? I can switch post-40? Are there fees involved at both ends if I switch (I.e. close the cash LISA= fee / open S&S LISA = fee)? 

There are no fees to transfer a cash LISA to a S&S LISA. S&S LISAs will have an investment management charge, as with any investment account (including pensions). In theory it should be possible to switch post-40, but in practice providers have not set up their systems to allow it, so as things stand over 40s with a S&S LISA are stranded with their current provider.

Thanks. I’m in a Cash LISA, so would switching post-40 be unlikely then? My provider wouldn’t let me go & no one would want me to join anyways? 

The issue is that no S&S LISA providers will open an account for an over-40 in order to accept transfers from other LISAs - the scheme rules dictate that LISAs can't be started (for the first time) after 40 but clumsy implementations of these rules by the S&S LISA providers don't differentiate between starting a new LISA for the first time versus opening one specifically to make a transfer (which should be allowed).

Mcfaggen

Thanks! I shall write to the Chancellor with that improvement suggestion! 

eskbanker

Mcfaggen said:

Thanks! I shall write to the Chancellor with that improvement suggestion! 

Presumably just flippant, but just in case it wasn't clear, the LISA scheme rules (determined by legislation) do already allow over-40s to open one in order to receive a transfer, but it's the providers who have chosen not to implement this (and to be fair, they're not actually obliged to).

https://www.gov.uk/guidance/managing-lifetime-isa-applications-and-accounts

Individuals who are 40 or older

Individuals who are 40 or older are not eligible to open a Lifetime ISA. They can however open an account to receive:

• a transfer from a Lifetime ISA that the investor opened before they were 40
• [...]

chrisjack2099

Hi, I have a question about the stipulation of never having owned a property. Both myself and my partner have opened a Lisa each and intend to combine them when buying our first home. The only snag is that we do already jointly own a piece of land. It is non-residential, essentially it's agricultural, and there is no dwelling on the land, nor will there ever be due to planning law. We are both on the title deeds for the land and it is on the land registry. I wouldn't personally ever consider it as us having owned a "home" - the house we intend to buy with our Lisa will be our first an only home - but does it constitute "property" for the purposes of the Lisa T&C's? Does this disqualify us from using the Lisa?