Lifetime ISA

ryanm8655

HI all,
Currently hitting my debts hard after a lengthy period of financial irresponsibility with a view to getting on the housing ladder.
Things are going pretty well and in 2 months all of my debt should be 0% interest.
I am also likely to inherit enough money to put down a deposit on a property within the next couple of years.
With this in mind I'm planning ahead and looking at setting up a lifetime ISA.
I've read the MSE guide and the Moneybox option looks the best bet, since I don't have any other ISAs I'd be looking to transfer.
Is there any reason I shouldn't do this? Initially I'd just be looking to pay in a token amount each month and then step it up once my debts are cleared (likely another year or so realistically). But if I was to inherit earlier then I could transfer in more, while having the timer activated, so to speak. Am I right in thinking I can transfer in my total yearly allowance in one lump sum, rather than that max allowance being split over 12 months?
I'm also not clear on the difference between the stocks and shares ISA? Presumably you still get the 25% bonus on what you pay in but rather than gaining interest as well, your pay off is dependent on the performance of your fund?
Thanks!

eskbanker

ryanm8655 said:

Am I right in thinking I can transfer in my total yearly allowance in one lump sum, rather than that max allowance being split over 12 months?

Yes.

ryanm8655 said:

I'm also not clear on the difference between the stocks and shares ISA? Presumably you still get the 25% bonus on what you pay in but rather than gaining interest as well, your pay off is dependent on the performance of your fund?

If you're looking to save a deposit for a property, forget about S&S LISAs and stick to a cash one - investing in stocks and shares is a long-term activity unsuited to those needing the money within a few years....

ryanm8655

That’s really useful! Thanks for your help.

I’ll open one with a token amount to get the timer started and look to transfer a lump sum just in time for the £1k bonus next year.

Thanks.

Tashierun

Hello All!
In this time of lockdown I am clearing up my finances and looking forwards. 
I am 39 and looking to open a LISA for retirement.  I have a private pension and a work pension that I match the max amount my company puts in. 
Should I open a SS LISA or a cash one?  My gut is saying cash to start then maybe a SS if I am feeling braver.  Also can I only put cash in there until I am 50 - what happens in the 10 - 15 years before I retire, in terms to saving into this LISA?
Thanks - your advise is much appreciated

wpa

We applied on-line on Monday 31st for a LISA with Moneybox and paid in the full £4k amount. It was easy and apparently trouble-free .... UNTIL ... a message came back after completion that they had already closed applications for 2019-20 and the amount paid in would go towards 2020-21 ! ... why did they not refuse the application or give the option to defer  - NOT HAPPY AT ALL WITH THIS.

ryanm8655

Tashierun said:

Hello All!
In this time of lockdown I am clearing up my finances and looking forwards. 
I am 39 and looking to open a LISA for retirement.  I have a private pension and a work pension that I match the max amount my company puts in. 
Should I open a SS LISA or a cash one?  My gut is saying cash to start then maybe a SS if I am feeling braver.  Also can I only put cash in there until I am 50 - what happens in the 10 - 15 years before I retire, in terms to saving into this LISA?
Thanks - your advise is much appreciated

From what I’ve read you’re better off investing in your pension than a lifetime ISA for retirement. For the 10 or so years I imagine it grows at the rate of interest applied or at the rate of growth of the fund you’re invested in?

Alexland

Tashierun said:

I am 39 and looking to open a LISA for retirement.  I have a private pension and a work pension that I match the max amount my company puts in. 
Should I open a SS LISA or a cash one?  My gut is saying cash to start then maybe a SS if I am feeling braver.  Also can I only put cash in there until I am 50 - what happens in the 10 - 15 years before I retire, in terms to saving into this LISA?

Over 20+ years then a Cash LISA would be unsuitable as the interest rate is likely to remain lower than inflation so you would be burning your bonus on erosion of spending power. Cash LISA are for people buying properties worth up to £450k in the next 1+ years. Similar to a pension it would make sense to invest your LISA in S&S to stand a good chance of getting long term growth above inflation and fees.

I would suggest you should certainly open a S&S LISA with a minimum payment to give you the option of making contributions up to the age of 50 in tax years where your situation might cause a LISA to be more advantageous than pension contributions. After the age of 50 you cannot further contribute so you will have to put spare money elsewhere.

ryanm8655 said:

From what I’ve read you’re better off investing in your pension than a lifetime ISA for retirement.

A pension is worth having to get the maximum employer contributions, contributing enough to get higher rate tax relief and avoid child benefit clawback (if those things are applicable). For a basic rate taxpayer then, once you have harvested maximum employer contributions, then a LISA would beat making extra contributions (as it's the same 25% uplift but there is no tax on withdrawal). However for a basic rate taxpayer with an employer that operates salary sacrifice (to also save the NI on pension contributions) then extra pension contributions works out about the same as a LISA.

Alexland

wpa said:

We applied on-line on Monday 31st for a LISA with Moneybox and paid in the full £4k amount. It was easy and apparently trouble-free .... UNTIL ... a message came back after completion that they had already closed applications for 2019-20 and the amount paid in would go towards 2020-21 ! ... why did they not refuse the application or give the option to defer  - NOT HAPPY AT ALL WITH THIS.

If they didn't tell you in the product details or during the application process then I agree you may have grounds for a complaint as the tax year has not finished yet. If you have £4k available then it might not be too late to open a LISA for the current tax year with another provider.

I see they have a button at the top of their website called "Tax Year Timings" that takes you to the below link so was that there when you applied? Even if it was I don't know why they would expect you to click on it if you already you already knew the tax year rules.

https://www.moneyboxapp.com/moneybox-end-of-tax-year-year-timings/

Under the guidance for ISA Managers then a subscription instruction can be collected after the tax year ends if the manager is in control of the collection process. I believe a direct debit (rather than a standing order) would be considered sufficient control even if it happens via their contracted partner Oaknorth. One of the other regulars (Masonic or Eskbanker) might want to give a second opinion on this.

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#cash-subscriptions