Should I have a LIFETIME ISA

Phaelok

Hi everyone,

I have just over £60k in savings and this is split up as follows:

Santander: £20k
Santander select: max £2400 holding
Halifax HTB ISA: £5850
Tesco x 2: £6000
Premium Bonds: £25,800

I am able to save circa £1800 per month and have no financial commitments. My plan is to purchase a home in the next 4-5 years.

Having held a number of other accounts in the past for their interest rates (e.g. Club Lloyds, TSB etc), I would like to open a LIFETIME ISA and have read the terms and conditions.

Given I already contribute to a teachers' pension, would it be better to have a LIFETIME ISA where the money is guaranteed or make AVCs via the prudential?

Many thanks for your help.

binaryuniverse

Phaelok wrote: »

My plan is to purchase a home in the next 4-5 years.

This is the crucial bit. If you've never bought a house before (and since you have a HTB I assume not), and you are planning to buy then, yes absolutely. And do it quickly before the tax year ends. Get it done tomorrow. An extra 25% on top of anything up to £4000 is not to sniffed at.

tallsam

I'm in a similar boat. But I already have a H2B and a LISA.

From my understanding I can pay in £4k to the LISA and £2.4k into my H2B. Then the remainder of my ISA allowance is free to use for a Cash or S&S ISA (of which I have both but under the overall limit). I'm aware I can only use the first time buyer bonus on one of them.

Is that correct or are the H2B and LISA allowance part of the same pot? IE if I max the H2B can I only use the remainder of the £4k on my LISA (£1.6k).

My plan is to keep both and use the H2B for a house and keep paying into the LISA until I'm 50 by which point it'll just be a frozen asset for retirement.

ValiantSon

tallsam wrote: »

I'm in a similar boat. But I already have a H2B and a LISA.

From my understanding I can pay in £4k to the LISA and £2.4k into my H2B. Then the remainder of my ISA allowance is free to use for a Cash or S&S ISA (of which I have both but under the overall limit). I'm aware I can only use the first time buyer bonus on one of them.

Is that correct or are the H2B and LISA allowance part of the same pot? IE if I max the H2B can I only use the remainder of the £4k on my LISA (£1.6k).

My plan is to keep both and use the H2B for a house and keep paying into the LISA until I'm 50 by which point it'll just be a frozen asset for retirement.

You can have both and save the full allowance in both. The HTB will be used for a house purchase and the LISA will be accessible at 60.

ValiantSon

Phaelok wrote: »

Hi everyone,

I have just over £60k in savings and this is split up as follows:

Santander: £20k
Santander select: max £2400 holding
Halifax HTB ISA: £5850
Tesco x 2: £6000
Premium Bonds: £25,800

A couple of things to consider:

1. Do you have a good reason for holding so much cash? Your savings are losing value due to inflation, so you may be better off long term by moving some of this money into investments (via an S&S ISA). If, of course, a large bulk of this money is going to be used for your deposit then you should keep it as cash until that time.

2. What is your average annual return on the premium bonds? It could well be that the money in premium bonds would be better in a savings account, whether easy access or fixed rate, or in interest paying current accounts and regular savers (or indeed a mixture of all four). If your prize winnings are averaging over 3-4% per year then the premium bonds are working well for you (although, of course, this may not last), but if you are getting the average return on them then you will be getting less than 1% of the value, and your money would be better elsewhere.

Phaelok wrote: »

I am able to save circa £1800 per month and have no financial commitments. My plan is to purchase a home in the next 4-5 years.

That's a very healthy sum (£21,600 per annum)! It would actually exceed your annual ISA allowance and, with some of your other savings, then I'd be surprised if you needed to wait 4-5 years to buy.

Phaelok wrote: »

Having held a number of other accounts in the past for their interest rates (e.g. Club Lloyds, TSB etc), I would like to open a LIFETIME ISA and have read the terms and conditions.

Given I already contribute to a teachers' pension, would it be better to have a LIFETIME ISA where the money is guaranteed or make AVCs via the prudential?

Many thanks for your help.

AVCs have not been universally popular in the profession. There has been some quite poor performance. I'd say that the LISA was potentially a better option, but perhaps more pertinent would be for you to look at the scheme flexibilities, especially additional pension and faster accrual. You would benefit from tax relief on these options and they deliver a guaranteed and index linked return in your pension.

Teachers' Pension Flexibilities