Lifetime ISA & Help to Buy - Bonus Payment

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Hi all,

This is my first post here and would really really appreciate any help or advice you can throw my way!

After doing some research I've got a few questions, mainly regarding the Lifetime ISA that's due to be launched in April this year...

I'll outline my position as it stands to give a bit of context. I've currently got a Help To Buy ISA that I'm putting £200 into every month and have Approx. £3000 in the account at the moment. I am saving to buy a house but It's unlikely this is going to happen until after June 2018 due to work commitments etc.

I'm aware that I can seemingly transfer the balance of my HTB to a new L-ISA and it wont affect the maximum £4000 contribution that can be made in the 17/18 tax year. However as it's unlikely I'll be able to save an additional £4k in the year to receive the maximum bonus payment come April 18 I was thinking I'd do this:

March 2017 - Close HTB Account and withdraw funds
April 2017 - Open L-ISA and deposit opening balance of £3000 (from original HTB)
May 2017 - Sept 2017 Continue to save £200 per month into L-ISA until I reach the maximum of £4000.
Oct 2017 - Continue to save £200 per month elsewhere up until March 2018 (6 months x £200 = £1200)

Here's the main bit I would really like clarifying...

April 2018 - £4000 in L-ISA is now entitled to 25% bonus of £1000 so now I essentially have £5000.

I've read that the bonus going forward after the first year is complete is then paid monthly. Based on this I would then, in April 2018 Transfer in £1200 that has been saved elsewhere.

Would this £1200 be entitled to a 25% (£300) at the end of April 2018?

So this means that if by some fortune you came into money and had a spare £4000 lying around in April 2018, you could essentially deposit this into your L-ISA (as the 18/19 tax year deposit), and take a 25% bonus at the end of the month. So you end up with an extra £2000 in the space of a month or 2 (The first £1000 bonus from the end of the 17/18 year and second £1000 based on the £4000 deposit in the first month of 18/19)?

It all seems to good too be true, and I've been told many times in the past that if something appears too good to be true, it probably is!

Apologies for the long post, and thanks to anyone who perceived through my ramblings! Like I said any help would be greatly appreciated as I've not seen anywhere that this is discussed.

Thanks, :)
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  • bobobski
    bobobski Posts: 771 Forumite
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    dinman90 wrote: »
    March 2017 - Close HTB Account and withdraw funds
    April 2017 - Open L-ISA and deposit opening balance of £3000 (from original HTB)


    Nooooooooooo don't do this. Transfer the HtB into a LISA, don't withdraw funds! Why wouldn't you transfer, leaving more "space" available in the LISA, in case you get a windfall? You don't have to fill it up.
    dinman90 wrote: »
    Would this £1200 be entitled to a 25% (£300) at the end of April 2018?

    So this means that if by some fortune you came into money and had a spare £4000 lying around in April 2018, you could essentially deposit this into your L-ISA (as the 18/19 tax year deposit), and take a 25% bonus at the end of the month. So you end up with an extra £2000 in the space of a month or 2 (The first £1000 bonus from the end of the 17/18 year and second £1000 based on the £4000 deposit in the first month of 18/19)?


    Yes.

    If I were you, I would transfer the whole HtB ISA into the LISA in April 2017, continue to save until it's full (which seemingly will take 5 months as you can only save £200 pm?), and then open a regular saver at 5% to save £200 pm in going forwards.
  • eskbanker
    eskbanker Posts: 31,517 Forumite
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    bobobski wrote: »
    If I were you, I would transfer the whole HtB ISA into the LISA in April 2017, continue to save until it's full (which seemingly will take 5 months as you can only save £200 pm?), and then open a regular saver at 5% to save £200 pm in going forwards.
    The LISA isn't full at £4K if there's £3K from transferred HTB 16/17 money, that's over and above the £4K 17/18 LISA allowance, i.e. OP can save up to £7K in a LISA by April 2018 if starting with this year's HTB money.
  • dinman90
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    Thanks for the feedback. It might seem a daft question though but if you're in the first year and transfer £3k over from the HTB and then manage to save a further £4K in the year do you get a 25% bonus on the total £7k? If that's the case then I understand why it makes sense.

    But if you don't get a bonus on the full £7k it's surely not worth it? Just put the £3k as your first £4K allowance and save up after that elsewhere and transfer that extra amount over in April 2018?

    You'd be almost doing yourself out of the extra bonus payment
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    edited 17 February 2017 at 8:34PM
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    dinman90 wrote: »
    Thanks for the feedback. It might seem a daft question though but if you're in the first year and transfer £3k over from the HTB and then manage to save a further £4K in the year do you get a 25% bonus on the total £7k? If that's the case then I understand why it makes sense.
    Yes, you get a bonus on what you put in which includes the £4k 2017/8 contributions AND the transferred-in HTB ISA contributions which had been made in 2016/7 and earlier years (e.g., £3k).

    If the transferred-in HTB ISA contributions include any money you put into the HTB ISA during tax year 2017/18, then those parts of the HTB will reduce the amount you can contribute directly into the LISA that year (because you're only allowed £4k total of "new 2017/18 money" to go into the LISA and get a bonus).
    But if you don't get a bonus on the full £7k it's surely not worth it?
    Well, you do, so it is.

    If you want to buy a house in June 2018 make sure you open your LISA by June 2017 because your LISA has to be open at least 12 months before you're allowed to take money out of it (including the bonus) to buy the house.
  • bobobski
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    eskbanker wrote: »
    The LISA isn't full at £4K if there's £3K from transferred HTB 16/17 money, that's over and above the £4K 17/18 LISA allowance, i.e. OP can save up to £7K in a LISA by April 2018 if starting with this year's HTB money.

    Oops yes sorry, my head was still in withdraw-from-HtB mode. Thanks for the correction :o
  • Joe_Bloggs
    Joe_Bloggs Posts: 4,535 Forumite
    edited 18 February 2017 at 2:33AM
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    Can the contributors to this beneficial ongoing record of financial discovery contribute as to the name of the the financial organizations that are the lender to the money as far as you know ?
    J_B.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    Joe_Bloggs wrote: »
    Can the contributors to this beneficial ongoing record of financial discovery contribute as to the name of the the financial organizations that are the lender to the money as far as you know ?
    J_B.
    Are you drunk? I ask because you are posting late at night, using an interesting turn of phrase, and asking what financial organizations are lender to the money; yet this is not a thread about borrowing money from a lender, but depositing money in a savings account.

    If you mean how is the bonus ultimately financed, the answer is that it is the UK taxpayer.

    If you mean what ISA managers offer the LISA product, the answer is that the LISA product does not exist yet, but it is expected that most if not all of the high street banking names and major building societies will offer cash-based LISAs, along with plenty of smaller players. Similarly, investment-based LISAs will be available from the big fund supermarket platforms and brokers, and potentially some of the direct-to-customer fund managers who currently offer ISA products.

    Not all providers will necessarily offer the LISA on the very first day that LISAs exist, because it takes time to develop and launch a new product, and the consultation period for the draft legislation only ended six weeks ago, with the government's analysis and final legislation yet to be published. Similarly the FCA's policy statement which was out for consultation is now being considered and will not be published until next month.

    From a legislative perspective, the intention is that the ISA regulations will be amended to allow the products to be offered from 6 April, but that does not mean every ISA manager will have a product available on that date.
  • Joe_Bloggs
    Joe_Bloggs Posts: 4,535 Forumite
    edited 18 February 2017 at 12:43PM
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    @bowlhead99
    I thank you for informative and comprehensive reply that is worthy of note for concerned citizens.

    Some informed financial institutions will not touch this lifetime isa with a barge pole. Name the financial institutions who will!
    J_B.

    '
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    Joe_Bloggs wrote: »

    Some informed financial institutions will not touch this lifetime isa with a barge pole. Name the financial institutions who will!
    J_B.

    '

    As explained. The product does not exist. The law has not been finalised to allow it to exist and the FCA have not finalised their policy.

    Once the legislation is in final form and sufficient time has elapsed for the financial institutions to launch and market their respective product offerings, feel free to check back here to see who has done that; perhaps I will name them for you at that point. There will be lots of them. If you would like to name the informed financial institutions who currently operate ISAs but will definitively not be offering a Lifetime ISA, I am sure we'd be entirely constructed from ears.
  • Joe_Bloggs
    Joe_Bloggs Posts: 4,535 Forumite
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    bowlhead99 said :-
    As explained. The product does not exist. The law has not been finalised to allow it to exist and the FCA have not finalised their policy.

    Clearly it is fine for people to imagine financial products that do not yet exist and discuss the on going consequential matters.

    The MSE person , dinman90 appears to believe that this product exists. Eskbanker also has a opinion on something that does not exist at present.

    What is the truth ? Are secrets leaking out ?
    J_B.
This discussion has been closed.
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