H2B or wait for LISA?

CricketLady

Good morning everyone!

Our daughter is 16 (17 in May) and we were considering opening a Help to Buy ISA for her to get her savings pot started early. However, we now think a LISA would be better for her so have decided to wait until she is 18. Our worry is that with the deadline looming for transferring H2Bs to LISAs being imminent, and she will be unable to do this as she isn't 18 yet, she would forever be locked into the H2B. Before we let the opportunity go by, can anyone see if there any advantage to be had to open a Help to Buy now? I am going round in circles trying to find the answer to this one so any help gratefully received.

MallyGirl

I will watch with interest as I am in a similar situation.
For a new HTB ISA I am not sure that there is a 'looming deadline' is there?

My main reason for looking at HTB is that the interest rate isn't too bad and most of her child accounts are no longer applicable.

CricketLady

Hi Mallygirl,

The 'looming deadline' I referred to was the deadline for transferring H2Bs to LISAs (March/April this year). 16 year olds with H2Bs won't be able to transfer (as the minimum age for LISAs is 18).

Glad I'm not on my own with this query - I feel such a responsibility to get my children's finances right, it's a minefield, isn't it?!

Cricketlady

xylophone

our daughter is 16

Does she have a JISA?

3.5% available from the Coventry BS - she could hold this tax year's (17/18 subscription, next year's (18/19) and subsequent (19/20) in the JISA and use the money to subscribe to the LISA after she turns 18?

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

CricketLady

Hi Xylophone, thanks so much for taking the time to reply,

Yes she does have a JISA, she has the Nationwide 3.25% one, has had it for a while now so building up nicely. Your suggestion is our current plan as I think it's the best option (glad I'm not going mad!), but I just wondered if it would be better for her to start a Help to Buy ISA when the new tax year comes in (she'll still be 16 then) instead of waiting till May next year.

eskbanker

CricketLady wrote: »

The 'looming deadline' I referred to was the deadline for transferring H2Bs to LISAs (March/April this year).

You're not the first to misunderstand this but there is no such deadline for transferring HTB ISAs to LISAs!

For anyone with a HTB ISA opened before this tax year and who wishes to take advantage of the one-off concession allowing pre-17/18 contributions not to count towards the annual LISA allowance of £4K when transferring, then that specific concession expires at the end of this tax year, but in all other circumstances (such as yours), a HTB ISA can be transferred to a LISA after 6 April 2018.

CricketLady

Hi Eskbanker, many thanks for your reply - I always value your opinion specifically,

I was perhaps confused by Martin's email today saying "there's a big deadline a week away if you want to shift your H2B ISA into a LISA" - I had assumed that this meant that if you didn't shift any H2B into a LISA imminently, you would never be able to shift your H2B into a LISA. (It doesn't take much to confuse me!)

Therefore, if I open a H2B for my daughter while she is still 16, I could still transfer it to a LISA in May 2019 (when she becomes 18)? But then, thinking "aloud", I couldn't add another 4128 to her 3.25% JISA in April this year...

CricketLady

Just remembered from my hours of research today, we could add to her JISA - whether we could AFFORD to add to her JISA as well is a different matter!

ValiantSon

CricketLady wrote: »

Hi Eskbanker, many thanks for your reply - I always value your opinion specifically,

I was perhaps confused by Martin's email today saying "there's a big deadline a week away if you want to shift your H2B ISA into a LISA" - I had assumed that this meant that if you didn't shift any H2B into a LISA imminently, you would never be able to shift your H2B into a LISA. (It doesn't take much to confuse me!)

Therefore, if I open a H2B for my daughter while she is still 16, I could still transfer it to a LISA in May 2019 (when she becomes 18)? But then, thinking "aloud", I couldn't add another 4128 to her 3.25% JISA in April this year...

CricketLady wrote: »

Just remembered from my hours of research today, we could add to her JISA - whether we could AFFORD to add to her JISA as well is a different matter!

You can't pay into a Cash ISA and a HTB ISA in the same year, unless you use one of the "split ISA" providers. I'm not absolutely sure if the rule applies with JISAs, but it may do, so you need to check. You can, however, have a Cash ISA and a LISA in the same year.

What is your intention with opening the HTB ISA? If you always intend for it to be transferred into a LISA then it may not be worthwhile, because the 25% bonus can only be provided once, i.e. on either the HTB or the LISA. If the intention is to provide her with money for a deposit then I'm not sure that the HTB is necessarily worth it because she will get a poorer rate than she is getting in her JISA. The top paying HTB ISA is currently Barclays at 2.53%, whereas your daughter's JISA is paying 3.25%. While the 25% bonus would normally make the HTB a better proposition, if you intend to transfer it into a LISA, then you won't get the 25% uplift from HTB.

As I suspect your daughter does not have sufficient savings or income outside of the JISA to worry about tax on savings then it could be just as well to deposit any money over the JISA allowance into a savings account, e.g. Santander 123 Mini (technically a current account) @ 3% on balances between £300 and £2000, or a regular saver, such as Halifax Kid's Regular Saver @ 4.5% on £100 p/m (effective annual rate = 2.42%). Obviously Halifax is a lower effective rate than Santander, but the interest is earned from the first £1, rather than having to wait until you hit £300.

Ed-1

ValiantSon wrote: »

You can't pay into a Cash ISA and a HTB ISA in the same year, unless you use one of the "split ISA" providers. I'm not absolutely sure if the rule applies with JISAs, but it may do, so you need to check. You can, however, have a Cash ISA and a LISA in the same year.

You can pay into a JISA and an adult cash ISA in the same year if you want to.

Ed-1

CricketLady wrote: »

Therefore, if I open a H2B for my daughter while she is still 16, I could still transfer it to a LISA in May 2019 (when she becomes 18)? But then, thinking "aloud", I couldn't add another 4128 to her 3.25% JISA in April this year...

You've not got anything really to gain from opening a H2B ISA at 16 and then a LISA at 18 other than the fact you can potentially use the H2B ISA to buy a house earlier.

This is because if you transfer funds from a H2B ISA into a LISA the funds count towards the £4k annual LISA limit, so the funds could come from anywhere, it doesn't have to be a H2B ISA.