Bonus query for MoneyBox Cash LISA

rhodesmjr

The MSE Guide on LISAs and MoneyBox LISA product details state "The bonus is paid monthly (if you've contributed that month) and takes between four and nine weeks to arrive." / "The government bonus will be paid monthly into your Cash Lifetime ISA".

I opened this account at the start of February with £4k and have just yesterday received the £1k bonus into my account. Great news! Although I'm a little confused as the above statements could be interpreted as receiving a portion (1/12th of the £1k) of the bonus on a monthly basis (on a four to nine week delay). Looks like I'm incorrect, has my experience been the same as everyone else? The rule is actually the £4k must be paid in within tax year to get the bonus for that tax year? The check for bonus payments just gets processed on a monthly basis? If you were to add £4k into one now and the £1k bonus paid out in mid April would it count towards this tax year or the next tax year?

I'm just thinking if the £4k doesn't have to be sat in the LISA account all year to earn the £1k bonus, it could earn marginally more interest elsewhere, like a easy access saver (1.3%), a fixed short term notice account or a Flexible ISA (mine's 1.5% at the moment) before moving it over towards the end of the upcoming tax year to secure that bonus.

Alexland

You get a 25% bonus based on your contribution value a month or two after it occurs. You can contribute up to £4k per tax year ending 5th April. The bonus and interest or investment return do not count as contributions and it doesn't matter if they occur in another tax year.

Many people with Cash LISAs saving for a property only add the contribution towards the end of the tax year as they can get a better interest rate elsewhere.

However for those of us using LISAs to invest in S&S for age 60 then we prefer to contribute earlier in the tax year to get stock market return on the bonus (as the general direction is upwards although not recently).

vic_msn

Yes, that is my understanding as well, also AFAIK the bonus or interest accumulated does not count towards your contribution limit.
So if you were to deposit £4K before Apr 5 this year, you can still get the £1K bonus credited in the next tax year and also make another contribution of £4K.

Also a 0.05% or 0.1% difference in your return on £4K isn't much, so if you are looking to maximise returns you should be investing it elsewhere, if not the Moneybox 1.25%(from next year) is just as good, plus you'll benefit from compound interest on accumulated deposit and bonus in the cash LISA.

Ed-1

rhodesmjr said:

The MSE Guide on LISAs and MoneyBox LISA product details state "The bonus is paid monthly (if you've contributed that month) and takes between four and nine weeks to arrive." / "The government bonus will be paid monthly into your Cash Lifetime ISA".

I opened this account at the start of February with £4k and have just yesterday received the £1k bonus into my account. Great news! Although I'm a little confused as the above statements could be interpreted as receiving a portion (1/12th of the £1k) of the bonus on a monthly basis (on a four to nine week delay). Looks like I'm incorrect, has my experience been the same as everyone else? The rule is actually the £4k must be paid in within tax year to get the bonus for that tax year? The check for bonus payments just gets processed on a monthly basis? If you were to add £4k into one now and the £1k bonus paid out in mid April would it count towards this tax year or the next tax year?

I'm just thinking if the £4k doesn't have to be sat in the LISA account all year to earn the £1k bonus, it could earn marginally more interest elsewhere, like a easy access saver (1.3%), a fixed short term notice account or a Flexible ISA (mine's 1.5% at the moment) before moving it over towards the end of the upcoming tax year to secure that bonus.

But the earlier you get the bonus, the more interest you get on the bonus.

Alexland

Ed-1 said:

But the earlier you get the bonus, the more interest you get on the bonus.

Yes but a better rate of interest on the £4k might still be worth more than a lower rate of interest on £5k.

rhodesmjr

Thankyou all for the replies! I feel the MSE article could be made a bit clearer about the £1k. The point about getting interest on £4k+1k in this account is better than putting the £4k elsewhere until the end of the next tax year for me.Thanks again!

eskbanker

rhodesmjr said:

I feel the MSE article could be made a bit clearer about the £1k.

I agree with you - as I recall, the reference in the article to 'monthly' was originally used to differentiate the first year of the scheme (when all bonuses were paid in one lump at the end of the tax year) from subsequent years, featuring monthly bonus claim cycles, but you're not the first to interpret this to imply some form of monthly bonus payment for a given contribution, rather than it being 100% clear that all bonuses are one-off payments per contribution.