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MSE News: Savers to be warned of risks before opening a Lifetime ISA



  • Ed-1
    Ed-1 Forumite Posts: 3,800
    Tenth Anniversary 1,000 Posts Name Dropper
    Mogley wrote: »
    If you are willing to forgo the flexibility of a S&S ISA then you get a 25% bonus each year which is not taxed on withdrawal at age 60 which is an advantage over a basic rate contribution pension and the basic S&S ISA.

    For me, the LISA product is a clever way for the government to generate short term cash flow advantages from the less financially savvy if used in place of additional savings in a pension.

    Generally people invest in pensions monthly and the government tops up the pension at the same time you invest. For the LISA, they have now shifted this contribution to yearly thus improving their cash flow. Because you don't get the government contribution as quickly with the LISA compared to the pension, you lose out on the growth you could have achieved from each monthly government contribution.

    You get the Government bonus monthly (from April 2018).
  • rmg1
    rmg1 Forumite Posts: 3,111
    Part of the Furniture 1,000 Posts Name Dropper
    Here's a quick couple of questions just to add to the mix.
    You can pay in until your 50 but can't withdraw to "supplement" your pension until 60 (I'm deliberately ignoring the house-buying/other options).

    So does the money just sit there for 10 years or does it continue to accrue interest?

    Also, one of my banks froze an account I'd forgotten about because there'd been no activity (except tiny interest payments) for 6 years.
    I could still withdraw the cash (about £8 at the time) but they'd stopped paying interest on it because of the lack of activity.

    Would the same apply here?
    :wall: Flagellation, necrophilia and bestiality - Am I flogging a dead horse? :wall:

    Any posts are my opinion and only that. Please read at your own risk.
  • Mogley
    Mogley Forumite Posts: 250 Forumite
    Ed-1 wrote: »
    You get the Government bonus monthly (from April 2018).

    Well that's new to me and made clear in your link posted earlier (which I've now read in full!!)... Thanks
    You should pay attention to the needs of the moment - otherwise there is no future. But to ignore the future is foolish - living solely for the moment leaves nothing for when the next moment arrives.
  • jimjames
    jimjames Forumite Posts: 17,150
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    rmg1 wrote: »
    So does the money just sit there for 10 years or does it continue to accrue interest?
    Probably an ideal example of what I'd mentioned earlier. If you're putting money in to supplement a pension as a long term plan then you shouldn't be getting interest, your money should be invested so it will grow from dividends and investment growth. It would be a bad idea to leave cash in an account for such long periods of time.

    Having said that, I'd expect that interest would be paid on any balances in the account but as with cash ISAs the rate paid will be pitiful.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • dunstonh
    dunstonh Forumite Posts: 114,249
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    So does the money just sit there for 10 years or does it continue to accrue interest?

    Why would you want to use a deposit based option to a long term period?
    Have you compared pension to lifetime ISA? For many, pension is the more tax efficient option.
    Would the same apply here?

    If you use a deposit option, then dormancy is a possibility if you go missing and dont respond to letters. If you use the investment option (which is the most suitable normally for your timescsale), then dormancy cannot apply
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Richard_Pedrick
    Richard_Pedrick Forumite Posts: 1 Newbie
    Does anybody know if you will be able to use your LISA for building a house? My wife and I are both first time buyers and are weighing up our options.
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