Can I convert my H2B?

jeddouthwaite

Hi, I am 18 years old and I currently hold a H2B ISA with Santander. What with the recent market slump, my dads financial advisor suggested that I should open a Stocks and Shares Lifetime ISA with Nutmeg as I don't plan to purchase a house for 5/6 years yet so I would, if things go to plan, get a much better return on that than my current H2B ISA. I currently pay into my H2B monthly and would plan on doing the same with the Stocks and Shares LISA.

My question is, can I close my H2B with Santander and withdraw the money in there even though I am not purchasing a house, and if so is there a penalty for doing this? On the key facts document it simply states that for advice on managing your ISA or closing your ISA you should visit a Santander branch, which I cannot really do in the current climate! 

Thanks

eskbanker

HTB ISAs are easy access accounts and can be closed without penalty.

However, I'd respectfully disagree with your dad's financial advisor about the wisdom of investing in stocks and shares (and especially a high-cost low-choice option like Nutmeg) when using a LISA for accumulating a first property deposit.  Five years is generally considered an absolute minimum for investing, so although your initial contributions would be invested for that long, everything afterwards wouldn't - this is why the usual recommendation on here is to use a cash LISA when saving for a property.

masonic

You haven't received a bonus on your H2B ISA, and there isn't a withdrawal penalty. You could keep both ISAs if you have enough money to fund the LISA outright, otherwise you can withdraw what you need through online banking. You'll use up part of your £20k allowance, but this may be of little concern if you don't plan to use it all, otherwise you'd need to perform a formal ISA transfer of up to £4k to preserve your allowance. Ultimately, you'd only be able to use one product towards your house purchase, but H2B ISAs generally have better interest rates than can be earned elsewhere.

I would question the advice from your dad's financial adviser. While it's true that you are likely to achieve a better return over 5 years than cash, and it's quite unlikely you'd sustain a loss, it's not guaranteed and you could end up worse off. A big market crash in 2025 could happen, so unless you'd be willing to delay your purchase or accept the loss if that did happen, investing over that time period would be unwise.

Ed-1

jeddouthwaite said:

Hi, I am 18 years old and I currently hold a H2B ISA with Santander. What with the recent market slump, my dads financial advisor suggested that I should open a Stocks and Shares Lifetime ISA with Nutmeg as I don't plan to purchase a house for 5/6 years yet so I would, if things go to plan, get a much better return on that than my current H2B ISA. I currently pay into my H2B monthly and would plan on doing the same with the Stocks and Shares LISA.

My question is, can I close my H2B with Santander and withdraw the money in there even though I am not purchasing a house, and if so is there a penalty for doing this? On the key facts document it simply states that for advice on managing your ISA or closing your ISA you should visit a Santander branch, which I cannot really do in the current climate! 

Thanks

What rate is the H2B ISA at?

jeddouthwaite

eskbanker said:

HTB ISAs are easy access accounts and can be closed without penalty.

However, I'd respectfully disagree with your dad's financial advisor about the wisdom of investing in stocks and shares (and especially a high-cost low-choice option like Nutmeg) when using a LISA for accumulating a first property deposit.  Five years is generally considered an absolute minimum for investing, so although your initial contributions would be invested for that long, everything afterwards wouldn't - this is why the usual recommendation on here is to use a cash LISA when saving for a property.

masonic said:

You haven't received a bonus on your H2B ISA, and there isn't a withdrawal penalty. You could keep both ISAs if you have enough money to fund the LISA outright, otherwise you can withdraw what you need through online banking. You'll use up part of your £20k allowance, but this may be of little concern if you don't plan to use it all, otherwise you'd need to perform a formal ISA transfer of up to £4k to preserve your allowance. Ultimately, you'd only be able to use one product towards your house purchase, but H2B ISAs generally have better interest rates than can be earned elsewhere.

I would question the advice from your dad's financial adviser. While it's true that you are likely to achieve a better return over 5 years than cash, and it's quite unlikely you'd sustain a loss, it's not guaranteed and you could end up worse off. A big market crash in 2025 could happen, so unless you'd be willing to delay your purchase or accept the loss if that did happen, investing over that time period would be unwise.

Thanks for the advice guys - I think he made the recommendation purely based on the fact that generally markets are low at the moment so you'd get some good discount on stocks through an ISA. He wasn't aware of my current circumstances with where I have money saved etc and it was more like a sweeping statement that a S&S LISA could be good right now - so I'm glad I have come on this forum!

Would you recommend converting my HTB ISA into a Cash LISA or should I just keep my current HTB?

Thanks

jeddouthwaite

Ed-1 said:

jeddouthwaite said:

Hi, I am 18 years old and I currently hold a H2B ISA with Santander. What with the recent market slump, my dads financial advisor suggested that I should open a Stocks and Shares Lifetime ISA with Nutmeg as I don't plan to purchase a house for 5/6 years yet so I would, if things go to plan, get a much better return on that than my current H2B ISA. I currently pay into my H2B monthly and would plan on doing the same with the Stocks and Shares LISA.

My question is, can I close my H2B with Santander and withdraw the money in there even though I am not purchasing a house, and if so is there a penalty for doing this? On the key facts document it simply states that for advice on managing your ISA or closing your ISA you should visit a Santander branch, which I cannot really do in the current climate! 

Thanks

What rate is the H2B ISA at?

Hi, the current rate is 2.25%

masonic

jeddouthwaite said:

eskbanker said:

HTB ISAs are easy access accounts and can be closed without penalty.

However, I'd respectfully disagree with your dad's financial advisor about the wisdom of investing in stocks and shares (and especially a high-cost low-choice option like Nutmeg) when using a LISA for accumulating a first property deposit.  Five years is generally considered an absolute minimum for investing, so although your initial contributions would be invested for that long, everything afterwards wouldn't - this is why the usual recommendation on here is to use a cash LISA when saving for a property.

masonic said:

You haven't received a bonus on your H2B ISA, and there isn't a withdrawal penalty. You could keep both ISAs if you have enough money to fund the LISA outright, otherwise you can withdraw what you need through online banking. You'll use up part of your £20k allowance, but this may be of little concern if you don't plan to use it all, otherwise you'd need to perform a formal ISA transfer of up to £4k to preserve your allowance. Ultimately, you'd only be able to use one product towards your house purchase, but H2B ISAs generally have better interest rates than can be earned elsewhere.

I would question the advice from your dad's financial adviser. While it's true that you are likely to achieve a better return over 5 years than cash, and it's quite unlikely you'd sustain a loss, it's not guaranteed and you could end up worse off. A big market crash in 2025 could happen, so unless you'd be willing to delay your purchase or accept the loss if that did happen, investing over that time period would be unwise.

Thanks for the advice guys - I think he made the recommendation purely based on the fact that generally markets are low at the moment so you'd get some good discount on stocks through an ISA. He wasn't aware of my current circumstances with where I have money saved etc and it was more like a sweeping statement that a S&S LISA could be good right now - so I'm glad I have come on this forum!

Would you recommend converting my HTB ISA into a Cash LISA or should I just keep my current HTB?

Thanks

The LISA and HTB ISA schemes are different, but both involve the same bonus and each have pros and cons. If you are saving over 5 years, then you will likely accumulate more than the £12,000 maximum balance on which the 25% bonus is available under the HTB ISA scheme. But you'll get a lower rate on a cash LISA, so I wouldn't be in a big hurry to move funds across. You could open a cash LISA with a pound and then move across the other £3999 at the end of this tax year (less anything you are able to save this tax year).

Alexland

jeddouthwaite said:

I think he made the recommendation purely based on the fact that generally markets are low at the moment so you'd get some good discount on stocks through an ISA. He wasn't aware of my current circumstances with where I have money saved etc and it was more like a sweeping statement that a S&S LISA could be good right now - so I'm glad I have come on this forum!

Nutmeg might be seen as cheap when compared to his advice fee. I would question the wisdom of an advisor who provides drive-by tips without making the slightest effort to understand circumstances.

jeddouthwaite said:

Would you recommend converting my HTB ISA into a Cash LISA or should I just keep my current HTB?

Read both MSE guides, consider the amount you have already built up in the HTB ISA and make your decision. Often we find that the £250k property price cap outside London can be the motivation for people to switch.