Lifetime ISA?

Adamc

Hi I'm looking at getting a LTI. Am I right in thinking that the penalty of early withdrawal is to lose the 25% bonus ... or are there additional ones?

I primarily intend to use it for retirement savings however I am yet to buy my first house and could potentially use it for that and transfer my Help to Buy ISA into that.

Are there any other products that might be worth me checking out?

Thanks

Herbalus

The penalty of early withdrawal (if not for a house purchase) is 25% of the withdrawn amount which includes the bonus.

So if you put in £80 and get £20 bonus, you have £100. Withdraw that £100 and you lose 25% i.e. £25, and you take away £75. More than what you started with.

oz0707

No its 25% I think so your 4+1k = 5000 less 25% 3750. Suppose there has to be a penalty to discourage access

djpailo

The way I understand it is that under normal circumstances, an early withdrawal has a 25% penalty.

If you put in £1000 and did not receive the bonus yet, and then tried to withdraw the money, you would only get £750 back (25% of £1000 is £250).

If you put in £1000, and then got paid the bonus, you would have £1250. If you then decided to withdraw the cash, after the 25% withdrawal penalty (25% of £1250 is £312.5) you'd get £937.5.

So its very simple, whatever is the amount of cash you have currently in the ISA, you will lose 25% of it, if you withdraw the funds "early". The only exception (i.e. no penalty) is if the account holder passes away or is terminally ill.

Of course, there is no withdrawal penalty or fee if you use the money to pay for a house (under £450,000) or you are over 60.

lopsyfa

djpailo wrote: »

The way I understand it is that under normal circumstances, an early withdrawal has a 25% penalty.

If you put in £1000 and did not receive the bonus yet, and then tried to withdraw the money, you would only get £750 back (25% of £1000 is £250).

If you put in £1000, and then got paid the bonus, you would have £1250. If you then decided to withdraw the cash, after the 25% withdrawal penalty (25% of £1250 is £312.5) you'd get £937.5.

So its very simple, whatever is the amount of cash you have currently in the ISA, you will lose 25% of it, if you withdraw the funds "early". The only exception (i.e. no penalty) is if the account holder passes away or is terminally ill.

Of course, there is no withdrawal penalty or fee if you use the money to pay for a house (under £450,000) or you are over 60.

That is not entirely true. Before the payment of the first bonus(5th Apr 2018), you can withdraw everything in the LISA without penalty but need to close the LISA.

Alexland

lopsyfa wrote: »

That is not entirely true. Before the payment of the first bonus(5th Apr 2018), you can withdraw everything in the LISA without penalty but need to close the LISA.

Yes you can withdraw without penalty until 5th April however the bonus will not be paid until a few weeks later.

aj23_2

You forfeit any bonus added to the account, and the penalty is 25% of what you have personally deposited, post 6 April 2018.

You've missed Skipton's deadline for transferring in your HTB ISA now anyway. If you did it now, they can't guarantee it would be done before 5 April 2018.

Lungboy

aj23 wrote: »

You forfeit any bonus added to the account, and the penalty is 25% of what you have personally deposited, post 6 April 2018.

That doesn't sound right. If it was, then someone who deposited £1000 would lose the bonus and then 25% of their £1000 as well and only get back £750. Everything I've read suggests it's 25% of the total, so you effectively lose 6.25% of your own capital, assuming zero growth of the funds within a S&S LISA.

aj23_2

Lungboy wrote: »

That doesn't sound right. If it was, then someone who deposited £1000 would lose the bonus and then 25% of their £1000 as well and only get back £750. Everything I've read suggests it's 25% of the total, so you effectively lose 6.25% of your own capital, assuming zero growth of the funds within a S&S LISA.

Sorry I meant 25% of the total, which is what has been deposited to your account anyway.

You deposit £4,000, and get a £1,000 bonus. You have £5,000.

You decide to withdraw early, and not use for a house or for a pension. The government will charge 25% penalty. You lose £1,250. That's the £1,000 bonus they take back, as well as £250 of the £4,000 you put in. Obviously, as the years roll by, the penalty will get bigger.

sovsov1357

If you're even contemplating withdrawing DON'T get a LISA! Other tax wrappers available such as ISA/SIPP etc.