Launch lifetime ISA Suppliers

bowlhead99

Ed-1 wrote: »

That's interesting. Does a transfer initiated before the end of the next year not count as OK if it is not completed until after the tax year has ended?

One assumes that simply requesting a new manager open an account for you at 11.55pm 5 April if you are going to fund it by transfer out from someone else will not typically count as a transfer in that year given. At that point it is an intention to transfer, which the old manager can't refuse when he gets it, but he is not going to get it until next year.

The transfer is effective when it's agreed between the three parties (investor, transferee, transferor) and primarily driven by the two ISA managers' terms and conditions given an individual customer is not going to have any negotiating power.

The industry has agreed standards of a maximum fifteen business day transfer time between cash ISA providers (unless investor agrees longer e.g. to avoid an early withdrawal interest penalty from old provider). The 15 days follows the practical steps involved with the transfer and the timeline was agreed within the industry as being achievable even for the smaller and more manually-based providers.

- Investor goes to new provider and says they would like to open an account, here is the instruction and authority to go and request my ISA money from my old provider.

- New manager has five business days to forward the instruction to the old manager

- Old manager has five business days to receive and react to the instruction and send the funds plus a transfer history form for compliance tracking purposes to the new manager

- New manager has three business days to receive and credit the funds to customer's account

- Two business days in the middle are allowed for first class post being sent one way and then the other. Altogether fifteen business days; three working weeks; if there are bank holidays it could be over 21 calendar days.

So, while some providers will be quicker than that between the two of them, and sometimes it might even just be the same provider moving money from their bank-offered HTB to their bank-offered LISA, they can take those three working weeks if they want. All you know is that the transfer will be officially on a mutually agreed date such that the old cash ISA provider's account should be paying you interest on your savings up until the day before the new provider starts.

If you think about how the process works, if it takes five days plus a day in the post for the old provider to even be told you want to transfer out, the new provider is not going to say, "OK Mr Old Provider, you found out on the 9th of April that the guy wants to transfer out, and you are not going to give me the funds until 16 April, but yes of course I am willing to pretend we can all go back in time and I'll take responsibility for paying all the interest to this guy from 2 April which is when he gave me a form on my website, even though its two to three weeks before I get a sniff of the money".

The transfer is usually effective when the money actually moves/clears because that's when the parties want to stop and start being responsible for paying interest under their respective terms and conditions without going back in time and back-value-dating the funds that they are pushing from one organisation to the other across the settlement system.

So, it would be pretty foolish to load money into your HTB ISA on Monday 2 April and then say to some new LISA provider, hey, please can you get in touch with the HTB provider in about a week's time and give him my authority to send you some money over the course of the following week oh and by the way we need to pretend this transfer all got completed in the next two days because it would give me a tax advantage, even though you won't get the money for 2-3 weeks.

Ed-1 wrote: »

Very relevant for transferring a pre-2017/18 H2B ISA balance into a LISA in tax year 17/18 only.

You already have customers on here complaining that some managers are transferring funds in ISA transfers via archaic paper-and-cheque solution and that they think it's outrageous that it sometimes takes two weeks, but that's life.

No doubt there will be someone who has £5k of HTB money and doesn't think to ask for it to be moved until it's impossible to practically complete it during the tax year, and then he will be on to Which mag or Times Money pages crying and telling them that they should create merry hell with the providers and get him some compensation for the scandalous way he's been treated and missed a bonus because it was their fault. The solution is, don't put yourself in that position.

ISA managers have some general HMRC reporting requirements within 60 days of the end of a tax year. However, for LISA, this next tax year will be a special one because the LISA manager needs to tell the administering agency what balances they want the bonuses to be paid on, within 14 days of tax year end, so that they can obtain and apply the first available bonuses. As it can take 21 days to do a transfer it's unlikely you'd be successful in getting that bonus if you tried to set up a LISA transfer in during last few days of 2017/8 -the money would not be there in time for anyone to look at account balances and report that a qualifying contribution transfer had actually been made by 5 April.

Plus

So far the following have said they will launch. Based on their existing ISA fees (so could be very wrong):

HL: likely £55 transfer out fee
Nutmeg: no transfer out fee
The Share Centre: possibly free transfers out, but £4.80 per month holding fee

For those who want to pay in on day one, that means Nutmeg is likely the best choice. If you invest in their 'cautious' fund, you'll pay roughly 0.65% in total fees, with annualised returns of average 4% per year (but could be negative, don't forget). It's pretty expensive in comparison to other S&S ISA providers, but if it allows you to claim your bonus it could be a price worth paying.

bowlhead99

Plus wrote: »

So far the following have said they will launch. Based on their existing ISA fees (so could be very wrong):

HL: likely £55 transfer out fee
Nutmeg: no transfer out fee
The Share Centre: possibly free transfers out, but £4.80 per month holding fee

For those who want to pay in on day one, that means Nutmeg is likely the best choice. If you invest in their 'cautious' fund, you'll pay roughly 0.65% in total fees, with annualised returns of average 4% per year (but could be negative, don't forget). It's pretty expensive in comparison to other S&S ISA providers, but if it allows you to claim your bonus it could be a price worth paying.

Nutmeg should probably not be characterised as 'pretty expensive in comparison to other S&S ISA providers' if the goal is to put relatively small amounts of money into a LISA to get the clock ticking. If you put in their minimum £500 in, and paid 0.65% on it for an entire year, that's what - three quid in total platform and fund fees?

With small amounts like that you might need to commit to adding £100pm on top of the £500 to meet their minimums, but the money is not going to be there all year if you are planning to move it into a cash product, so your fee might be no more than a pound or two. If they have no exit fees on LISA just like they have no exit fees on normal ISA, then that 'two pounds of cost and zero exit fee' in a market where others charge £30+ to exit, is laughably cheap.

The problem with nutmeg is needing to be actually invested in something. If you put in £500 in month 1 and £100 in month two and then the whole fund drops in value by 10% over the course of the six months before you get around to transferring out, that's £60 of loss. Whereas at Hargreaves you could just have your cash sitting in a cash park facility without actually buying any investments, pay them less than £60 to exit, and overall be 'up' on the arrangement because you didn't suffer any investment loss.

Plus

bowlhead99 wrote: »

The problem with nutmeg is needing to be actually invested in something. If you put in £500 in month 1 and £100 in month two and then the whole fund drops in value by 10% over the course of the six months before you get around to transferring out, that's £60 of loss. Whereas at Hargreaves you could just have your cash sitting in a cash park facility without actually buying any investments, pay them less than £60 to exit, and overall be 'up' on the arrangement because you didn't suffer any investment loss.

That's true, however paying a little more (about 1%, as you say fairly small in cash terms) will get you a 'fully managed' Portfolio 1 at the bottom end of their risk scale that has returned between 0.3 and 2.6%pa for the last four years it's been running. They don't actually say the current holdings (a fact that makes me severely unimpressed), but I suspect they're in cash or bonds. A 10% loss would be relatively uncommon for a fund targeted at capital preservation - in that case you have a £6 fee with a low chance of a £60 loss, against a certainty of a £60 loss with HL (or whatever the numbers they announce are).

smithandy80

Hi,

My apologies if this has already been covered, but I just want to know if I am getting the facts straight.

So, I started a help2buy ISA in May 2016.

Am I correct in saying that I can continue paying £200 pcm into that help2buy, and monthly payments into a new 2017/18 LISA totaling £1600.

I can then transfer the full help2buy ISA into my LISA in March 2018, because only £2400 of the help2buy would be counted as 2017/18 payments, and will add to the £1600 already in the LISA.

So I can pay more than the £4000 annual maximum into the LISA, so long as anything over the £4000 was deposited in the previous year.

Essentially, I should open a LISA on April 6th this year, then in March 2018, I should transfer the full help2buy into the LISA, and then increase my payments to the maximum in the LISA to max out the benefit?

Does that sound right?