Lifetime ISAs guide

eskbanker

hieveryone said:

eskbanker said:

hieveryone said:
From calculators, it seems that if I pay in the max per year of £4000 for the next 11 years, I'll have paid in £42.240, but my 'pot' will be worth £90,609 when I'm 60 - which seems a little... too good to be true?! 

I'd regard such calculators with suspicion - for a start you'd pay in £44K if contributing £4K/year for 11 years, but the returns will inevitably be based on assumptions which may or may not turn out to be accurate.  £90K sounds like a lot of money but its real-terms value will be substantially less in 21 years time, due to inflation, so don't be seduced by an apparently large number like that, as expressed in 2024 money terms!

If this is money towards long-term retirement planning, you're presumably looking at a S&S LISA rather than a cash one?

Thank you - I guess relatively 'long term' (I'm 39). Stocks and Shares ISAs scare me a little! 

Not as scary a prospect of being almost guaranteed to lose real-terms value to inflation IMHO, but if you've missed the opportunity to open a LISA in a hurry, you can take your time reading up about investing before committing....

masonic

hieveryone said:

masonic said:

hieveryone said:

eskbanker said:

hieveryone said:

eskbanker said:

hieveryone said:

I've asked a question over on savings board about ISA's but thinking I should investigate a LISA. I currently have 20k in a standard cash ISA from this year and was planning to just open another one for the new tax year. 

Would I be better to open a LISA now (I'm 39), stick 4k in, and then I can put another 4k in after the tax year and get 2 lots of bonus? 

Do you mean that you've paid £20K of new money into your cash ISA this tax year?

If so, then unless it's a flexible ISA, the only way to get any of that into a LISA before the cutoff would be via an ISA transfer, but that's highly unlikely to complete in time, especially if you haven't even opened it yet.

If you still have £4K headroom in your £20K 2023/24 ISA allowance then you can indeed pay that into a new LISA, which would generate a bonus, with this being repeatable again from next week.

Thanks, I don't think it is a flexible one unfortunately, so that may be out. However, from the new tax year I can open a LISA and put 4k in, and then another ISA with 16k in is that right? 

Yes, that's right.

From calculators, it seems that if I pay in the max per year of £4000 for the next 11 years, I'll have paid in £42.240, but my 'pot' will be worth £90,609 when I'm 60 - which seems a little... too good to be true?! 

If inflation over those 21 years averaged 3.5%, then the £90,609 would be worth about £44,000 in today's money, so nowhere near 'too good to be true' territory in my view.

That's true, but then I guess what I had saved in cash without the bonus would be worth even less by then? 

Cash often loses value due to inflation over long periods, which is why those saving towards retirement are better off investing. The LISA bonus may help stave off losses due to inflation, but it would be considered a poor outcome to retire with a pension pot worth only about the same amount in real terms that was contributed to it.

hieveryone

masonic said:

hieveryone said:

masonic said:

hieveryone said:

eskbanker said:

hieveryone said:

eskbanker said:

hieveryone said:

I've asked a question over on savings board about ISA's but thinking I should investigate a LISA. I currently have 20k in a standard cash ISA from this year and was planning to just open another one for the new tax year. 

Would I be better to open a LISA now (I'm 39), stick 4k in, and then I can put another 4k in after the tax year and get 2 lots of bonus? 

Do you mean that you've paid £20K of new money into your cash ISA this tax year?

If so, then unless it's a flexible ISA, the only way to get any of that into a LISA before the cutoff would be via an ISA transfer, but that's highly unlikely to complete in time, especially if you haven't even opened it yet.

If you still have £4K headroom in your £20K 2023/24 ISA allowance then you can indeed pay that into a new LISA, which would generate a bonus, with this being repeatable again from next week.

Thanks, I don't think it is a flexible one unfortunately, so that may be out. However, from the new tax year I can open a LISA and put 4k in, and then another ISA with 16k in is that right? 

Yes, that's right.

From calculators, it seems that if I pay in the max per year of £4000 for the next 11 years, I'll have paid in £42.240, but my 'pot' will be worth £90,609 when I'm 60 - which seems a little... too good to be true?! 

If inflation over those 21 years averaged 3.5%, then the £90,609 would be worth about £44,000 in today's money, so nowhere near 'too good to be true' territory in my view.

That's true, but then I guess what I had saved in cash without the bonus would be worth even less by then? 

Cash often loses value due to inflation over long periods, which is why those saving towards retirement are better off investing. The LISA bonus may help stave off losses due to inflation, but it would be considered a poor outcome to retire with a pension pot worth only about the same amount in real terms that was contributed to it.

What would be a better alternative?

masonic

hieveryone said:

masonic said:

hieveryone said:

masonic said:

hieveryone said:

eskbanker said:

hieveryone said:

eskbanker said:

hieveryone said:

I've asked a question over on savings board about ISA's but thinking I should investigate a LISA. I currently have 20k in a standard cash ISA from this year and was planning to just open another one for the new tax year. 

Would I be better to open a LISA now (I'm 39), stick 4k in, and then I can put another 4k in after the tax year and get 2 lots of bonus? 

Do you mean that you've paid £20K of new money into your cash ISA this tax year?

If so, then unless it's a flexible ISA, the only way to get any of that into a LISA before the cutoff would be via an ISA transfer, but that's highly unlikely to complete in time, especially if you haven't even opened it yet.

If you still have £4K headroom in your £20K 2023/24 ISA allowance then you can indeed pay that into a new LISA, which would generate a bonus, with this being repeatable again from next week.

Thanks, I don't think it is a flexible one unfortunately, so that may be out. However, from the new tax year I can open a LISA and put 4k in, and then another ISA with 16k in is that right? 

Yes, that's right.

From calculators, it seems that if I pay in the max per year of £4000 for the next 11 years, I'll have paid in £42.240, but my 'pot' will be worth £90,609 when I'm 60 - which seems a little... too good to be true?! 

If inflation over those 21 years averaged 3.5%, then the £90,609 would be worth about £44,000 in today's money, so nowhere near 'too good to be true' territory in my view.

That's true, but then I guess what I had saved in cash without the bonus would be worth even less by then? 

Cash often loses value due to inflation over long periods, which is why those saving towards retirement are better off investing. The LISA bonus may help stave off losses due to inflation, but it would be considered a poor outcome to retire with a pension pot worth only about the same amount in real terms that was contributed to it.

What would be a better alternative?

As eskbanker suggested, a S&S LISA would be the natural choice for retirement. Then the money could be invested in a similar fashion to a pension.

red_mush95

Hi there,

Just a quick question in regards to a my LISA situation! 

My partner bought her house independently 3 or so years ago! I’ve lived in it with her from the start however, the mortgage was always solely in her name! I don’t have any claim to this house! (I have paid my half of all bills etc but it is HER home)

I have a LISA with moneybox which I’ve planned to use for our ‘forever home’ purchase! I know we can use my LISA for a joint house purchase as I am classed as a first time buyer as I’ve never owned a property before! 

Does any of this change if we decide to get married? Her house would still be her’s! I wouldn’t be placed on any deeds or anything of that nature! It will always be hers! 

Talk of marriage has arisen and I want to know if the marriage would affect our intended use of the LISA which has a sizeable chunk of cash in it!

regards

eskbanker

red_mush95 said:

My partner bought her house independently 3 or so years ago! I’ve lived in it with her from the start however, the mortgage was always solely in her name! I don’t have any claim to this house! (I have paid my half of all bills etc but it is HER home)

I have a LISA with moneybox which I’ve planned to use for our ‘forever home’ purchase! I know we can use my LISA for a joint house purchase as I am classed as a first time buyer as I’ve never owned a property before! 

Does any of this change if we decide to get married? Her house would still be her’s! I wouldn’t be placed on any deeds or anything of that nature! It will always be hers!

Getting married would change many things, but eligibility to use a LISA penalty-free towards what would be a first property purchase for you isn't one of them....

jonon

Are partial transfers into LISA's now allowed? So have funds in a cash ISA, then drip feed into a stocks LISA over the year? 

eskbanker

jonon said:

Are partial transfers into LISA's now allowed? So have funds in a cash ISA, then drip feed into a stocks LISA over the year? 

The rule change introduced earlier this month permits subdivision of current year money across ISAs of the same type, as well as across different types (which was always allowed before), so I'm not sure that there's anything new affecting transfers from cash ISAs to LISAs?

masonic

As above, partial transfers from an ISA to a LISA have always been allowed, subject to the provider permitting them.

Alexland

Crikey 185,400 customers have paid £126,840,000 in LISA early withdrawal charges. So a higher percentage of customers have so-far been penalised than have used a LISA towards a qualifying property purchase (not that some of us ever intended to use our LISA for that purpose).

https://www.ii.co.uk/analysis-commentary/lifetime-isa-fit-purpose-ii532228