Switching LISA within 12 months of buying

Ytfcmadtrumpeter

Hi there,
So back when LISA's first came onto the market I set one up with Nutmeg. I was never keen on the whole risk of stocks and shares so set it at the most 'cautious' risk option and hoped for the best.
My wife and I are now finally in a position to buy our first home, hoping to do so this summer, but of course with the whole Covid issue the value of my LISA is tumbling by the day (I'm now at -£600 interest)
Keen to save myself from any further loss I have looked into switching the money to a non-stocks and shares LISA but the terms of LISAs state a '25% reduction in Government bonus if money is withdrawn for any reason (including buying your first home) within 12 months of opening the LISA'.
Does this term count if the money was transferred from a different LISA?

Thanks in advance
Jordan

eskbanker

Ytfcmadtrumpeter said:

the terms of LISAs state a '25% reduction in Government bonus if money is withdrawn for any reason (including buying your first home) within 12 months of opening the LISA'.
Does this term count if the money was transferred from a different LISA?

No, a transfer to another LISA doesn't count as a withdrawal so there's no 25% penalty when transferring, provided you instruct the new provider to handle the transfer via their defined process.

Ytfcmadtrumpeter said:

So back when LISA's first came onto the market I set one up with Nutmeg. I was never keen on the whole risk of stocks and shares so set it at the most 'cautious' risk option and hoped for the best.

At the risk of asking the obvious, why didn't you simply open a cash LISA? Skipton's product came to market within a couple of months of the scheme launch - even if that delay was significant for you, there's obviously been plenty of opportunity to transfer since.  I don't mean to kick you when you're down but just to highlight to other readers the real danger of your approach - low risk stocks and shares are still investments without capital protection and so would rarely be advisable for anyone needing the money in the short term (<5 years).

Ytfcmadtrumpeter

Thanks for your reply. Sorry, just to confirm you understood my question fully- its not the transferring process that I am worried about causing a 25% deduction as I have had the original LISA for a few years, but the fact that the LISA I wish to transfer it to will hopefully only be set up for a few months before I plan to withdraw the money to buy a house.

I get the point about  why going the stocks and shares route in the first place but there wasn't another option at the time (I think another building society were suggesting that they were going to offer a cash LISA but then didnt go through with it before Skipton came on the scene) and by that point my money seemed pretty secure using the Cautious risk option with most of the money placed in what I understood to be very secure government bonds.

masonic

Ytfcmadtrumpeter said:

Thanks for your reply. Sorry, just to confirm you understood my question fully- its not the transferring process that I am worried about causing a 25% deduction as I have had the original LISA for a few years, but the fact that the LISA I wish to transfer it to will hopefully only be set up for a few months before I plan to withdraw the money to buy a house.

Transferring a LISA to another provider doesn't affect when it was opened.

eskbanker

Yes, apologies, I misunderstood the question!  As above, transferring a LISA preserves the start date, so it's the date of originally opening the first one that counts when measuring the 12 month period, i.e. you'll be OK....