LISA closed rather than transferred - should I be worried?

NewShadow

Afternoon All,

Been reading around the net today but nothing is quite like the bespoke opinion of knowledgable peers.

A little background for context.

Some time ago I cashed in my SS LISA in anticipation of purchasing a house in late 2020.

In February this year I instigated a transfer of the full balance from A J Bell to a cash LISA provider.

I was notified by my new provider that they had received the funds and therefore essentially switched off - my intention was to pay in this year's £4k around February 2020, but until then to simply ignore the account as it accrued minimal interest.

Yesterday, I received a letter from my new provider telling me that A J Bell had closed the account - rather than transferring the LISA - meaning they had received the funds but HMRC no longer recognised them as being in a LISA wrapper.

My provider is in the process of returning the funds to A J Bell for them to rectify the situation and transfer the LISA in due course.

Two questions - if you please:

1. Should I be concerned?

The LISA spans three years of funds - hence three years of government bonus' which were liable for repayment on closure, plus had exceeded the 12 month anniversary.

I'm a little worried the HMRC penalty will have been applied and the clock will be reset, meaning bureaucratic nonsense will be required to make things as they should be.

With the greatest respect for my colleagues - I work in a Government bureaucracy... can anyone speculate how easy/quick or difficult this is likely to be to resolve?

2. Should I be doing anything - To either expedite matters now or to secure my position against future loss?

At the moment, I have the letter from my currently assigned provider saying they will notify me in due course - should I be talking to A J Bell and getting anything in writing from them?

I know it's not groundbreaking, but I'm losing around 50p a day interest - and potentially have lost around £45 in interest that would have accrued to date if the transfer had been carried out correctly.

I'm not looking for 'compensation' but if I do end up losing - say - the equivalent of 6 months interest due to an error I would expect the party who made the mistake to make restitution.

This can/will all be addressed once the dust settles and the final balances tallied, but is there a benefit in me taking any action now to make that final accounting easier?

Advise and opinions welcomed.

Thanks in advance,

NS.

masonic

Strange because AJ Bell seemed to me to be very clued up about LISAs and the rules surrounding them.

They will need to reinstate the LISA at their end, and would hold the balance in cash. They may try to repeat the transfer, or may wait for your instructions. It would be worth contacting AJ Bell, either now or later - I'd contact them sooner rather than later so you can better understand what has happened on their side.

TBH, I'm not buying the new provider's version of events. Closure would be subject to the 25% withdrawal penalty and it would be quite a serious matter if AJ Bell were letting people close and cash in their LISAs without penalty. Closure of the existing account is also part of the transfer process. It seems more likely the transfer paperwork has simply been lost by the new provider - and this would account for the apparent delay in them "realising" the transfer was not legitimate (it doesn't take 3 months to complete a transfer of a closing balance).

You should ask the party who is in error for compensation equivalent to the amount of interest you have lost. It wouldn't be unreasonable to expect a good will payment of £50-100 on top, even if things go smoothly from here on out.