Lifetime ISAs guide

Flobberchops

JeanLaCritique wrote: »

Hello All.

I opened a help to buy with Halifax in December and have been putting the maximum in each year.

Am I best served transferring this into a LISA once it becomes available. Are there any downsides to the LISA over HISA? Will LISA also include a gross interest like banks have offered?

I don't think any banks have announced rates yet. Arguably you're already getting an AER of 25% from the annual bonus so some banks may try fobbing us off with 0% interest... we'll have to wait and see.

Downsides would include the withdrawal restrictions. If you lose first-time buyer eligibility then you're stuck with choosing between losing the bonus and taking a 5% penalty, or waiting until you're 60 to get your money. If there's a reasonable chance the money may *not* go towards a house, I'd suggest maybe sticking with the HTB for now. It's a moot point until we see what the LISA rates are, anyway.

blue_mango wrote: »

I would like to open a help to buy isa and then transfer it to LISA. Possible, right? When I'm opening HTB isa, is it okay to let the bank know about my plans to transfer it later on?

From what I gather, LISA seems to be intended as a replacement for HTB so I have every confidence that transferring will be allowed. Perhaps even strongly encouraged/compulsory at some point if the gov decides to aggressively phase-out HTBs.

masonic

Flobberchops wrote: »

I don't think any banks have announced rates yet. Arguably you're already getting an AER of 25% from the annual bonus so some banks may try fobbing us off with 0% interest... we'll have to wait and see.

It's not an AER of 25% because the bonus is paid only once on the money paid in. For money is held in the LISA for 20 years, you'd only get an AER of 1.1% + whatever interest the bank pays you.

colsten

Flobberchops wrote: »

From what I gather, LISA seems to be intended as a replacement for HTB so I have every confidence that transferring will be allowed. Perhaps even strongly encouraged/compulsory at some point if the gov decides to aggressively phase-out HTBs.

You will be able to transfer whenever you like. There is a special incentive for transfers in 2017-18 only, when you will get a 25% bonus on the transferred amount.

See 1.16 in https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508176/Lifetime_ISA_final.pdf

Sibda

We have read HM Govt detailed rules but can't see saver qualifications regarding this point.
We have a 34 year old daughter working in USA for past 5 years and who plans to return to UK to work and live win the next 5 years. Can she join this scheme?

masonic

Sibda wrote: »

We have read HM Govt detailed rules but can't see saver qualifications regarding this point.
We have a 34 year old daughter working in USA for past 5 years and who plans to return to UK to work and live win the next 5 years. Can she join this scheme?

As soon as she becomes resident in UK for tax purposes she can.

Phil1482

colsten wrote: »

Excuse me? If you had an inheritance, or inheritance windfall - however sad the circumstances of the inheritance might have been -, you'd expect the taxpayer to give you something extra on top?

For me I'd be comfortable losing the government bonus part of it (albeit disappointed), it's the 5% penalty that makes it a much harder decision.

Thanks to Grey Gym Sock for the advice above, I'll take some time to ponder it over.

Flobberchops

masonic wrote: »

It's not an AER of 25% because the bonus is paid only once on the money paid in. For money is held in the LISA for 20 years, you'd only get an AER of 1.1% + whatever interest the bank pays you.

Martin's Article Here states that the 25% is paid annually. It also compounds. Unless I'm misunderstanding?

masonic

Flobberchops wrote: »

Martin's Article Here states that the 25% is paid annually. It also compounds. Unless I'm misunderstanding?

Clearly, you are misunderstanding if you think you can open one of these next year, pay in a one off £4,000 and then get a 25% per year return each year (e.g. come back 20 years later and your £4,000 investment has become £347,000).

jimjames

Flobberchops wrote: »

Martin's Article Here states that the 25% is paid annually. It also compounds. Unless I'm misunderstanding?

Annually on the payments into account THAT year. It wouldn't be 25% if it was paid on the full balance, every year. Blinding scheme if it was but I don't think they are quite that generous!

amandaleeds

jimjames wrote: »

Annually on the payments into account THAT year. It wouldn't be 25% if it was paid on the full balance, every year. Blinding scheme if it was but I don't think they are quite that generous!

So am I correct in thinking that if I were able to pay the full £4k in each year (very unlikely unless I get a huge payrise!) I get an extra £1000 added in from the government each year. So after 2 years I should have £10k in the account? For every year after my balance would go up by 5k (4k + 1k from the government)?