LISA BONUS

Kazza1002

If my son opens a LISA on 25/01/2022 and invests £4000 then pays a further £4000 in on the 06/04/2022 (new tax year) would the bonus of £2000 be available after the 1st year anniversary of opening the account for eg. If his first time house purchase was completing in Feb 2023 would he be eligible to receive the £2000 bonus.  Or would the payment made on the 06/04/2022 have to be in for a whole year to qualify for the 2nd £1000 bonus i.e. the house purchase completion would have to be after the 06/04/2022 to qualify for the £2000 bonus?

Alexland

The bonus is added into the account roughly a month or two after each contribution. The solicitor cannot make a penalty free withdrawal towards a qualifying property purchase until the account has been open 12 months. New contributions don't reset the 12 month clock.

Kazza1002

Thank you Alexland very much for your swift reply & the good news! So just to reiterate. If my son decides to invest a 3rd £4000 on the 06/04/2023 and in May 2023 the 3rd bonus is added via HMRC,  the solicitor can make a penalty free withdarwal of  £15000 (£12000 + £3000 bonuses)  towards a qualifying property purchase in June 2023? Is that correct?

Alexland

Yes the 3rd bonus should be in the account by early June 23 unless there is an unexpected delay claiming it between the provider and HMRC.
Basically each month the provider takes an extract of contributions since the 6th of the previous month and the 5th of the current month and submits a claim to HMRC which takes around a month to get paid and distributed into accounts.
Even if the bonus is added too late he wouldn't have lost anything as he can still use the £14k for the purchase and use the £1k to begin his use of a LISA towards age 60+ although at this point it's usually best to transfer from a cash to S&S product as it would then be a long term investment.

Kazza1002

Thank you so much for all your help. Aswell as the S&S favoured route to save for retirement. Many thanks.

cloud_dog

@Alexland, I thought LISA providers operate the bonus payment period pretty much in line with pension TR credits.  If you pay in by 5th of the month it is credited approx 6 weeks later, and if you pay in on the 6th of the month it may take 10 weeks.

In the OPs example the 25 January bonus should be credited on/around 20 April, and the 6 April bonus will be credited on/around 20 June?

EDIT:  I take it all back, should never have doubted it

eskbanker

cloud_dog said:

@Alexland, I thought LISA providers operate the bonus payment period pretty much in line with pension TR credits.  If you pay in by 5th of the month it is credited approx 6 weeks later, and if you pay in on the 6th of the month it may take 10 weeks.

In the OPs example the 25 January bonus should be credited on/around 20 April, and the 6 April bonus will be credited on/around 20 June?

No, LISA bonus payments are made about 28 days after the end of each bonus claim period on the fifth of the month (14 days for provider to submit claim then 14 days for claim to be paid), so the bonus for a contribution on 25 January should arrive in early March, and a 6 April one by early June (as @Alexland correctly said).

Alexland

cloud_dog said:

@Alexland, I thought LISA providers operate the bonus payment period pretty much in line with pension TR credits.  If you pay in by 5th of the month it is credited approx 6 weeks later, and if you pay in on the 6th of the month it may take 10 weeks.

In the OPs example the 25 January bonus should be credited on/around 20 April, and the 6 April bonus will be credited on/around 20 June?

It's basically the same provider claim process (although LISAs have an advanced API with HMRC) but our last 5 years experience with Nutmeg, then HL and more recently with AJ Bell is that our LISAs had the bonus added around 2 weeks earlier than you are seeing on your pension tax relief. When checking my wife and kids' SIPP transaction history last year with Fidelity (which I know you also use) then it does seem to take an extra 2 weeks. No idea if that's typical but maybe if Fidelity offered LISAs they could slow them down to match expectations...