Skipton cash LISA

MortgageSeeker2018

Hi there, not sure if this question has been asked already somewhere on here, but couldn't find it. In tax year 18/19, the bonus on the Skipton cash LISA is paid monthly, so if I were to pay in the maximum £4k on April 6, would I get 1 twelfth of the government bonus per month, on £4k, in the same way I would if alternatively I'd contributed £4k in bits throughout the year? Confusing...

eskbanker

No, if you pay £4K in in one go, then you'd get the 25% bonus of £1K applied in full in one go too, about 4-8 weeks later.

MortgageSeeker2018

Aha, thank you. So, would you say it is better to put £4k in on April 6, in order to maximise the interest on my overall contribution (£8k) for the year? Or wait until the last month of tax year 18/19? Thereby keeping £4k elsewhere to beat the interest rate on the Skipton cash LISA. If that makes sense..

eskbanker

MortgageSeeker2018 wrote: »

Aha, thank you. So, would you say it is better to put £4k in on April 6, in order to maximise the interest on my overall contribution (£8k) for the year? Or wait until the last month of tax year 18/19? Thereby keeping £4k elsewhere to beat the interest rate on the Skipton cash LISA. If that makes sense..

As Skipton only pays 0.75% interest, it shouldn't be too difficult to get a better total return from £4K elsewhere than 0.75% on £5K, i.e. anything better than about 0.94% in a competing account will leave you ahead during the period up to the end of the tax year (ignoring the lag times for both bonus payment and transfer into LISA in this rough-and-ready calculation!).

binaryuniverse

If you've got £4000 to put in right now then you are better off opening a Nationwide/First Direct/M&S (via switch) account and utilising one of their regular savers to pump £250/£300pm in to it, pocketing the interest, then sticking the 4k in to the LISA at the end of the tax year.

Whilst you are doing this, you could have the £4000 sitting in a savings account/high interest current account, slowly dripping the money in to the regular saver, to make more interest.

Of course, the regular savers have terms of 2 months, so ideally, you'd have wanted to start this process around Mid March, as if you start now you'll miss the 2018/19 tax year cut off. Although I think NW allow withdrawals on their RS.
Even so. High interest current accounts are also a good shout for the next 12 months.

But putting it in to the Skipton LISA, right at the start of the year, is a poor MSE choice. Bonus additions or not.

MortgageSeeker2018

Thank you both for your replies, very helpful! Point taken re not ploughing the £4k into Skipton until later in the tax year. I have a BoS current account paying 2pc on up to £5k (I think), so will keep it in there until say Feb 2019. Also drip feeding a regular saver with Lloyd's currently, ending in Oct. Thanks again, my question is answered

knack92

MortgageSeeker2018 wrote: »

Thank you both for your replies, very helpful! Point taken re not ploughing the £4k into Skipton until later in the tax year. I have a BoS current account paying 2pc on up to £5k (I think), so will keep it in there until say Feb 2019. Also drip feeding a regular saver with Lloyd's currently, ending in Oct. Thanks again, my question is answered

Another benefit of doing it this way is if your circumstances have changed in a years time and you need the £4000 it will be readily accessible without penalty.

ciaomagre

Just to give a slightly different perspective - I'd decided to do the opposite and have paid a lump sum of £4k straight into my Skipton LISA today. Since I already have 4k in there (actually £4,300 as had a H2B transfer into it), this means that in the next month or so I am due the two government bonuses, so I'll have a LISA balance of about £10,300. A year of 0.75% on that figure means I'm going to get about just under £80 interest in a year's time.

If I were to open up a regular saver now like a First Direct one with 5% interest, and drip feed my lump sum into that (lots of people giving advice about LISA's seem to recommend this approach), I would make just under £100 in interest. So yes whilst it is more interest and 'free money' to do it this way, it is only a difference of about £20.

I prefer the option of dumping it all now in the LISA because at least then the money is totally "locked" in my LISA and I can't do anything about it / no temptation to withdraw it / no temptation to not save the max each month.

Not that I'm saying you should do this, I just wanted to offer a slightly different perspective! It depends on your approach to saving, your level of monthly will power, and how keen you are to get that (in my opinion nominal) extra interest.

intalex

Also, IF you plan to buy a property soon, the sooner you pay into the LISA the sooner the bonus is credited, hence no delays waiting around for the bonus!

eskbanker

ciaomagre wrote: »

Just to give a slightly different perspective - I'd decided to do the opposite and have paid a lump sum of £4k straight into my Skipton LISA today. Since I already have 4k in there (actually £4,300 as had a H2B transfer into it), this means that in the next month or so I am due the two government bonuses

Just to be clear, you'll get the bonus on the 2017/18 money in a month or so; the bonus on the 2018/19 £4K will be another month after that.

ciaomagre wrote: »

I'll have a LISA balance of about £10,300. A year of 0.75% on that figure means I'm going to get about just under £80 interest in a year's time.

If I were to open up a regular saver now like a First Direct one with 5% interest, and drip feed my lump sum into that (lots of people giving advice about LISA's seem to recommend this approach), I would make just under £100 in interest. So yes whilst it is more interest and 'free money' to do it this way, it is only a difference of about £20.

No, that's a flawed comparison, because if you used a regular saver for the 2018/19 money you'd still be getting about £40 interest on the 2017/18 money in the LISA as well, so the difference would be more like £60 than £20.

ciaomagre

eskbanker wrote: »

No, that's a flawed comparison, because if you used a regular saver for the 2018/19 money you'd still be getting about £40 interest on the 2017/18 money in the LISA as well, so the difference would be more like £60 than £20.

Yes, good point I had forgot about that.

I still prefer to do it this way for the simplicity of it, and the lack of temptation. I like just plonking it in there then not having to think about it again. If you can bothered then it is worth it for the extra interest, but I personally cannot