LISA for student daughter

Plumbwizard

My daughter is at university and I'd like to start off a LISA for her so that she has some kind of deposit for a house/flat in a couple of years time.  My plan is to deposit £4k a year for the next 3 years with the Government topping up with the additional 25% allowance.

I would imagine that she still has a bit of time to go before she even starts to contemplate buying a house so all i am trying to do is give her a wee kick start to her deposit when the time is right.  I'm paying for this out of my retirement lump sum (I just took early retirement on a DB scheme).  I can afford it and I'd rather start off something for her now rather than just squirrel the money away until it's time for her to inherit it....

Anyone have any suggestions on good LISAs?  Or any other advice on this approach?

eskbanker

https://www.moneysavingexpert.com/savings/lifetime-isas/#bestbuys lists the small number of providers who offer this product, which has never really caught on in a big way - the 25% government bonus is way more significant than the derisory interest rates, so they're all much of a muchness really.

You can't open one for her, she'd have to do it herself....

Alexland

If she is not going to buy for a while a Cash LISA will lose spending power to inflation but she might not have enough investment years to have confidence that a S&S LISA will deliver a positive outcome. Also remember that with house price growth the £450k property price cap might in future limit her choice especially if she ends up combining buying power with a partner or wants to buy in a more expensive area. Sorry it's not really an answer but will hopefully give you something to think about.

eskbanker said:

which has never really caught on in a big way

Government published statistics suggest there are over half a million LISA accounts still receiving subscriptions, around 3% of the eligible population which is not too bad for a complicated product with limited purposes.

Albermarle

I was wondering why the Nottingham building society was not mentioned as they were always one of the best paying LISA's.
Apparently they have migrated their LISA customers to Beehive .

eskbanker

Alexland said:

eskbanker said:

which has never really caught on in a big way

Government published statistics suggest there are over half a million LISA accounts still receiving subscriptions, around 3% of the eligible population which is not too bad for a complicated product with limited purposes.

Yes, I should have clarified - never really caught on in a big way with institutions rather than customers, and hence the small number of providers, most of which (for the cash variant) are minor players rather than the majors!

Plumbwizard

Thanks to everyone.  It seems to me to be a relatively risk free way of ring fencing some cash for an obvious use further down the line.  If I invest 12k for her over the next 2 years (3 tax years) she will have 15k to go towards a deposit just when she's leaving university and that's not a bad starting place I think.  If she isn't in a position to get on the housing ladder at that point then she can just add some cash as she sees fit over the following years knowing that the government will top it up with 25% of her contribution.  

Worst case scenario she withdraws the money as she needs it for something else and loses 25%.  But as she hasn't contributed anything yet...

I don't think I could invest it anywhere else and make a 25% profit on it.  

It seems like the right thing at the right time but wondered what others thought 

Plumbwizard

Just to add - I know she has to do this herself ie I give her the money and she invests it in the appropriate account.  She's pretty sensible so I've no real issues on that score 

Alexland

Plumbwizard said:

Worst case scenario she withdraws the money as she needs it for something else and loses 25%.

£4000 would get a £1000 bonus to £5000 and the 25% withdrawal penalty would be £1250 so a £250 loss, 6.25% of the £4000.

Albermarle

Another scenario is that she does not use it for a house purchase, but instead she keeps it for when she is ( a lot) older.

The Lisa has a dual role and can also be used for retirement saving . All the money can be accessed tax free and with no penalty at age 60. 

Alexland

Albermarle said:

Another scenario is that she does not use it for a house purchase, but instead she keeps it for when she is ( a lot) older.

If she does that it's worth remembering to transfer the account to a S&S LISA provider for likely above inflation long term real growth.

Plumbwizard

You know what kids are like at that age though - well mine anyway - long term planning is the last thing on their minds.  And as she's just gone into second year having lost pretty much all of her first year to Covid lockdown I'd rather she concentrated on studying and enjoying the great social benefits that university brings.  She can start worrying about houses and jobs and pensions etc in a couple of years time.  So my short term aim is just to put some money aside in the most helpful way I can and it seems that a LISA is a good option. I could just get her to put the money into a S&S ISA and take her chances.  But having seen the efforts my older daughter has had to put in to try to get a deposit for a house (easier seeing I've just handed some cash over to her too), I do feel that ringfencing the money for housing is a good option.  And as you say, if not she could always just treat it as a pension top-up thing.

I see that Foresters Friendly Society [no linky] doesn't get a mention anywhere (I'm not allowed to post a link apparently so apologies)

One of my daughters friends told me at the weekend that she has a LISA with them...