Lifetime ISAs guide

Ed-1

NevvyC wrote: »

This is my point...

How can it still be 'best practice' as recommended by MSE to open a H2B ISA at this stage (when a LISA is more generous...) you'd just have to transfer your H2B into the LISA anyways and at this late stage wouldn't reach the £1600 threshold before April 5th (max obtainable would be 1400 now - meaning missing out on the gov bonus on the H2B as it didn't meet the 1600 criteria)

Unless masonic's point is correct (and you would see 25% bonus on the H2B sum deposited prior to April 5th 2017 -- so long as you keep the H2B ISA open and hit that £1600 threshold before transferring to the LISA -- but then, in theory, why not KEEP running the H2B alongside the LISA for the year, earning interest, and then at the last chance to merge the 2, do-so, so your money is working for you accruing interest..)

Thanks in advance

You can do both. You're not getting the H2B bonus when you transfer money built up before 6th April 2017 to LISA. Instead you're essentially getting an increased LISA allowance so instead of being able to put £4,000 in the LISA and get a 25% bonus, you're allowed to put £4,000 + whatever balance is in the H2B ISA on 5th April 2017.

I'm going to keep my H2B ISA and open a LISA, and then assuming my H2B ISA is paying more interest than my LISA, in March 2018 transfer previous tax year contributions (i.e. money built up before 6th April 2017) into my LISA. My LISA balance after this transfer will be around £8,500, and in April 2018 I'll get a 25% bonus on that sum in my LISA, so £2,125 bonus will go into my LISA. I can then either use my H2B ISA or LISA to buy a first home, but using the LISA will be better as I'll be able to build up money faster in it, so my H2B ISA will then become a regular savings account at a good interest rate.

masonic

Danniegorton10 wrote: »

Looking for a bit of advice. Me and Husband have taken some time to go through out finances now that we are almost debt free, and have set up a plan to start paying into a Lifetime ISA from next month however feel like there is none available that seem to be prepared for this change. I am happy to wait until next year when the highstreet banks have them available and more is known about them, however my question is where do I save the cash in the meantime? Just in a savings account, or should we open a Help to Buy ISA for a year and then transfer to the LISA in a years time?

You have until the end of the next tax year to find a LISA that meets your needs without losing any of your first year allowance. It's not surprising that banks are not prepared for the change when the exact nature of the change hasn't even been finalised yet and no guidance has been issued to them by the regulator.

System

Ed-1 wrote: »

You can do both. You're not getting the H2B bonus when you transfer money built up before 6th April 2017 to LISA. Instead you're essentially getting an increased LISA allowance so instead of being able to put £4,000 in the LISA and get a 25% bonus, you're allowed to put £4,000 + whatever balance is in the H2B ISA on 5th April 2017.

I'm going to keep my H2B ISA and open a LISA, and then assuming my H2B ISA is paying more interest than my LISA, in March 2018 transfer previous tax year contributions (i.e. money built up before 6th April 2017) into my LISA. My LISA balance after this transfer will be around £8,500, and in April 2018 I'll get a 25% bonus on that sum in my LISA, so £2,125 bonus will go into my LISA. I can then either use my H2B ISA or LISA to buy a first home, but using the LISA will be better as I'll be able to build up money faster in it, so my H2B ISA will then become a regular savings account at a good interest rate.

Is that accurate ? I don't think you would see a 25% bonus on anything over 4K.

Despite the fact your contributions to your H2B were made in a different tax year...

I haven't seen any stipulations for that, only "1k max bonus on max contributions of 4K" in LISA : I don't know that the LISA would honour bonuses from other ISAs hence my point why bother with a H2B now; you could just have your (assuming) 4500 (8500 - 4000 LISA) earning interest elsewhere eg. Tesco current at 3% up to 3K ; TSB current 3% up to 1.5K ; regular saver accounts at 5% etc.etc.

I agree of course you'd be able to transfer your H2B balance over to the LISA but seriously doubt you'd see any bonus over the 4K mark as that's a stipulation of the ISA (max 1K bonus on 4K contributions per annum)

...in which case you could still have your (still assuming) 4500 accruing higher interest in other accounts and also your LISA in addition to chuck at a house deposit as 2 separate lumps but with better buying power due to the better interest elsewhere (without the H2B restriction anyway of 25% gov bonus at exhange deposit -- not mortgage deposit, or whichever way round it is! It's still a (minor) hindrance...)

In May 2018 (after the 1year LISA clock has ticked down) you'll start seeing 25% interest PCM (but I still believe that's on the max 4K yearly limit ? -- not the entire balance ?!) so after 1 year, 4K would net you the max 1k (25%) then if you chucked in the Max 4K again in year 2 immediately (for arguments sake) you'd only see 25% representative on the 2nd 4K (not 8K total balance) monthly (so 1k max bonus / 12 months) added each month as interest


Be great if MSE had gone into this area in greater depth rather than just skimming the surface then pointing to the forum for any further advice so we could get solid, 100% factual stipulations and can therefore make fully informed decisions...

Sestren

I think the article is fairly clear as it stands!

In the LISA's first year, the 25% bonus will be paid at the end of the year. It will be paid on anything up to £4000 deposited into the LISA as well as money transferred over from a HTB ISA. It's a one-off deal to take into account the fact that the LISA is in some ways an 'upgrade' of the HTB (although it's not quite as simple as that, obviously).

In future years, the 25% bonus will be paid monthly on any money paid into the LISA that month.

So, my own plan is to transfer my £1600 HTB ISA into a LISA and make the £4000 maximum subscription on top of that for 17/18. On the 6th April 2018 I'll get a bonus of £1400 (25% of £5600). When the new tax year rolls around I'll transfer another £4000 in, and receive a bonus of £1000 at the end of April 2018. I'll then be fully subscribed for 18/19.

System

Sestren wrote: »

I think the article is fairly clear as it stands!

In the LISA's first year, the 25% bonus will be paid at the end of the year. It will be paid on anything up to £4000 deposited into the LISA as well as money transferred over from a HTB ISA. It's a one-off deal to take into account the fact that the LISA is in some ways an 'upgrade' of the HTB (although it's not quite as simple as that, obviously).


Hmm, it wasn't that black and white to me - but do you have a specific place in the article you can quote/link me to there so I can check that out


In future years, the 25% bonus will be paid monthly on any money paid into the LISA that month.

So, my own plan is to transfer my £1600 HTB ISA into a LISA and make the £4000 maximum subscription on top of that for 17/18. On the 6th April 2018 I'll get a bonus of £1400 (25% of £5600). When the new tax year rolls around I'll transfer another £4000 in, and receive a bonus of £1000 at the end of April 2018. I'll then be fully subscribed for 18/19.

That's a good plan in that case... Theoretically (in the year 1 of LISA) could you leave the £1 'subscription' in there and build up your £3999 elsewhere to drop in at the last possible moment of year 1: ie. March 2018 ??

Thanks

Sestren

NevvyC wrote: »

Hmm, it wasn't that black and white to me - but do you have a specific place in the article you can quote/link me to there so I can check that out

It's under point 5:

If you've already saved into a Help to Buy ISA before the Lifetime ISA starts, you'll be allowed to transfer it into the LISA, still getting the bonus, without it having an impact on your allowance...

• Only money put in a Help to Buy ISA before 6 April 2017 can be transferred without impacting the allowance.
• You'll have until 5 April 2018 to transfer it across.
• Money saved in a Help to Buy ISA after 6 April 2017 and before 5 April 2018 can be transferred to a LISA, but will use up a part of your 2017/18 LISA allowance.

There's a link to an article called 'how to max gains by timing it right' underneath that which might have more information - I've only skimmed it.

NevvyC wrote: »

That's a good plan in that case... Theoretically (in the year 1 of LISA) could you leave the £1 'subscription' in there and build up your £3999 elsewhere to drop in at the last possible moment of year 1: ie. March 2018 ??

Thanks

Yeah, that's probably the best course of action depending on what LISAs/interest rates are available. All that matters is that you need to have done it before the end of the tax year.

System

And technically the LISA article would be incorrect if what you guys are saying is true and you will see the 25% bonus on top of any H2B contributions prior to April 6th 2017 ...

As the article states the MAX reward you could get is 32K (opening LISA at 18 and achieving the MAX every year until you're 50 = 1K per year x 32years = 32K) if you'd opened a H2B at 16 (min age, from Dec 2015) and transferred this to the LISA then did your 32year MAX contributions this would be OVER 32K with the bonus on the H2B sum built up before April 2017 (if what you guys are saying is correct... So the article isn't entirely clear or perfect)

System

Sestren wrote: »

It's under point 5:



There's a link to an article called 'how to max gains by timing it right' underneath that which might have more information - I've only skimmed it.



Yeah, that's probably the best course of action depending on what LISAs/interest rates are available. All that matters is that you need to have done it before the end of the tax year.

Ah that's great, thank you, been reading so much information from so many different sources it's all become jumbled up/convoluted! Many thanks!

So you don't even need to hit the £1600 threshold in H2B before transferring to LISA (so long as before April 5th 2017 you'll still get a 25% bonus on it even if only £1200 built up in the H2B by then...)

So my last post was accurate then (the article states MAX return of 32K but it would be more than this if you merge your H2B into it like many of you are planning ...)

Thanks

leitmotif

For the many people who've asked us "Isn't this age discrimination?" the answer is yes, it is. However it is not illegal age discrimination; no more than setting a state pension age is.

Could somebody explain Martin's comment with reference to legislation? As far as I can see, the Equality Act 2010 makes it illegal for a government department to set policy that discriminates on the basis of the 'protected characteristic' of age.

masonic

leitmotif wrote: »

Could somebody explain Martin's comment with reference to legislation? As far as I can see, the Equality Act 2010 makes it illegal for a government department to set policy that discriminates on the basis of the 'protected characteristic' of age.

The LISA legislation is exempt from age discrimination requirements. That's the beauty of being able to legislate - you can make exemptions when needed, just like the example Martin gave about pension age. The same is true of such things as the age of criminal responsibility, the age of consent, voting age and the legal drinking age. Even the requirement to renew your driving licence at 70 and every 3 years thereafter. None of these things are classes as illegal age discrimination.