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

Ed-1

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

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?

Mogley

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

jimjames

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.

dunstonh

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

Richard_Pedrick

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.