LISA/HTB - what to do after April '18

bowlhead99

JustAnotherSaver wrote: »

Since neither will be looking to buy their house any time soon (i'd say for both we're at least 5 years away) would it then be better to leave the money in a HTB ISA for as long as possible & then if the bonus max has been met, THEN pay in to a cash LISA (since HTB ISAs offer better interest) and then when it comes close to buying their house just transfer the HTB ISA money over to a cash LISA?

Would that be better?

When it comes the time of purchase, each buyer can only use either a HTB ISA or a LISA to buy their property with the help of a bonus. I think you get that bit.

But:

If you don't transfer your HTB ISA into a LISA product by the end of this tax year preserving the bonus-able status of the money in it, you lose the opportunity to do so. You could still physically move it into the LISA later but it would count against that year's LISA contribution limit, and might take multiple tax years to bring it all over manually staying within the "max £4k a year into the LISA" rules.

For this tax year ONLY as a transition year you are allowed to contribute to the LISA £4k of new 2017/18 money plus whatever had built up in the HTB prior to 6th Apr '17.

Whereas, in future years you can only do £4k total new money into the LISA and *anything* put into the LISA counts against the limit including transfers from HTB ISAs.

If you can only do £200 a month and you like the high rate of the HTB, one thing to consider is to use a decent "regular saver" account - e.g. Nationwide Flexclusive Reg Saver pays 5% on up to £250pm and is instant access so when you get to the end of a tax year you can drop the accumulated balance into the LISA and go back to saving outside the ISA from month to month in the RS accounts.

You are right of course that if you will definitely never be able to exceed the HTB limit and will not be buying an expensive property at the end, you don't need to embrace the LISA but you never know what good fortunes or presents or pay rises or bonuses or unexpected inheritances might bring.

JustAnotherSaver

bowlhead99 wrote: »

For this tax year ONLY as a transition year you are allowed to contribute to the LISA £4k of new 2017/18 money plus whatever had built up in the HTB prior to 6th Apr '17.

Whereas, in future years you can only do £4k total new money into the LISA and *anything* put into the LISA counts against the limit including transfers from HTB ISAs.

If you can only do £200 a month and you like the high rate of the HTB, one thing to consider is to use a decent "regular saver" account - e.g. Nationwide Flexclusive Reg Saver pays 5% on up to £250pm and is instant access so when you get to the end of a tax year you can drop the accumulated balance into the LISA and go back to saving outside the ISA from month to month in the RS accounts.

Wasn't aware of the opening quote. I thought you could transfer in later years too. And the regular saver thing is a very good point.

+1 for the LISA then.

Hopefully you don't leave this board. You're too helpful


Question is, when would you open a cash LISA/transfer to it?

February sound fair? Not too early/late?


EDIT x2: What about the point of accessing the money, is it different for the HTB ISA and the LISA?
I'd imagine that it'd be needed to form part of the deposit, so would need accessing at that stage of the house buying process & not at the very end after you've got your keys & you've moved in.

Plus

someone wrote: »

One thing that worries me is LISAs seem to have been a damp squib compared to the simple HTB ISA product for both customers, banks and the government.

The autumn budget is in 11 days. One can only hope the ISA products will get streamlined in a way that would avoid this HTB ISA / LISA situation.

My guess would be the Government's exit strategy for LISAs if the market becomes unsustainable is to allow them to become regular ISAs, including the bonus and with no withdrawal penalty.

That is basically zero-cost for a future government (because they gave up the tax revenue in the years people contributed, so there's no further tax revenue for future-HMG to lose when subscribers withdraw unless they hit the penalties), is relatively painless in terms of admin (plenty of existing ISA providers and the rules are well understood), and gets the government some good PR ('free cash for savers') instead of having to admit their policy failed. From savers' perspective it's a win because you lose nothing, you are just no longer forced to spend it on a house or waiting until 60 though you can still do that if you want.

All other things being equal, it might in some cases be rational to gamble on LISAs 'failing' because it then looks roughly like a SIPP where you don't have to wait until retirement to withdraw. Only your own assessment can tell you whether it's worth risking the 6% withdrawal penalty if they don't 'fail' in this way.