Is my Help-to-buy ISA still good

ciccio01

My daughter has a Help-to-Buy ISA which is just 18 months old. She gets low interest but a 3k bonus at the end.

My question is, should I stop this and transfer to another ISA which pays 4.2%  on a 1-year fixed term

masonic

Not if she intends to use the HTB ISA to buy her first home in the short term. A £3k bonus implies a £12k balance, meaning further contributions are not attracting any further bonus. A Lifetime ISA may be more attractive if she is definitely not going to buy before 6th April 2025, as she could transfer £4k per tax year from one to the other and at the start of the 2025/26 tax year (and each year thereafter) deposit a further £4k to receive £1k extra bonus. edit: if she's had it only 18 months, the maximum balance would be £4,600+interest and bonus only £1,150, so fully transferable to a LISA within this and next tax year, and could therefore be used just a year after opening with a balance of up to £10k including bonus

If she never intends to own a home, then the HTB ISA bonus is effectively beyond her reach and there would be no point in continuing with the HTB ISA when there are better paying options available, such as the one you highlight.

ciccio01

masonic said:

Not if she intends to use the HTB ISA to buy her first home in the short term. A £3k bonus implies a £12k balance, meaning further contributions are not attracting any further bonus. A Lifetime ISA may be more attractive if she is definitely not going to buy before 6th April 2025, as she could transfer £4k per tax year from one to the other and at the start of the 2025/26 tax year (and each year thereafter) deposit a further £4k to receive £1k extra bonus. edit: if she's had it only 18 months, the maximum balance would be £4,600+interest and bonus only £1,150, so fully transferable to a LISA within this and next tax year, and could therefore be used just a year after opening with a balance of up to £10k including bonus

If she never intends to own a home, then the HTB ISA bonus is effectively beyond her reach and there would be no point in continuing with the HTB ISA when there are better paying options available, such as the one you highlight.

Sorry i made a mistake its 25  month shes had it so will in total will save 26,600

eskbanker

ciccio01 said:

My daughter has a Help-to-Buy ISA which is just 18 months old. She gets low interest but a 3k bonus at the end.

Just to be sure, it hasn't been possible to open a HTB ISA for over three years, unless it was to transfer an existing one - did she open her first one many years ago?

ciccio01 said:

My question is, should I stop this and transfer to another ISA which pays 4.2%  on a 1-year fixed term

HTB ISAs are for adults, does she need (formal) assistance to look after her money?

masonic

ciccio01 said:

masonic said:

Not if she intends to use the HTB ISA to buy her first home in the short term. A £3k bonus implies a £12k balance, meaning further contributions are not attracting any further bonus. A Lifetime ISA may be more attractive if she is definitely not going to buy before 6th April 2025, as she could transfer £4k per tax year from one to the other and at the start of the 2025/26 tax year (and each year thereafter) deposit a further £4k to receive £1k extra bonus. edit: if she's had it only 18 months, the maximum balance would be £4,600+interest and bonus only £1,150, so fully transferable to a LISA within this and next tax year, and could therefore be used just a year after opening with a balance of up to £10k including bonus

If she never intends to own a home, then the HTB ISA bonus is effectively beyond her reach and there would be no point in continuing with the HTB ISA when there are better paying options available, such as the one you highlight.

Sorry i made a mistake its 25  month shes had it so will in total will save 26,600

The contribution limits for a HTB ISA are £1,200 in the first month, followed by £200 per month. For a HTB ISA open for 25 months, the maximum balance is £6,000+interest with an entitlement to a £1,500 bonus. The maximum balance that attracts a bonus is £12,000 (£3,000 bonus). If the total savings are £26,600, either some of those savings are not in the HTB ISA, she's had it a lot longer than 25 months, or there is a mistake in that figure too.

ciccio01

eskbanker said:

ciccio01 said:

My daughter has a Help-to-Buy ISA which is just 18 months old. She gets low interest but a 3k bonus at the end.

Just to be sure, it hasn't been possible to open a HTB ISA for over three years, unless it was to transfer an existing one - did she open her first one many years ago?

ciccio01 said:

My question is, should I stop this and transfer to another ISA which pays 4.2%  on a 1-year fixed term

HTB ISAs are for adults, does she need (formal) assistance to look after her money

The ISA was opened Nov 20. She's 22. It's me asking her to review in light of other available accounts. she does not need formal assistance. Its dad looking after daughter

ciccio01

masonic said:

ciccio01 said:

masonic said:

Not if she intends to use the HTB ISA to buy her first home in the short term. A £3k bonus implies a £12k balance, meaning further contributions are not attracting any further bonus. A Lifetime ISA may be more attractive if she is definitely not going to buy before 6th April 2025, as she could transfer £4k per tax year from one to the other and at the start of the 2025/26 tax year (and each year thereafter) deposit a further £4k to receive £1k extra bonus. edit: if she's had it only 18 months, the maximum balance would be £4,600+interest and bonus only £1,150, so fully transferable to a LISA within this and next tax year, and could therefore be used just a year after opening with a balance of up to £10k including bonus

If she never intends to own a home, then the HTB ISA bonus is effectively beyond her reach and there would be no point in continuing with the HTB ISA when there are better paying options available, such as the one you highlight.

Sorry i made a mistake its 25  month shes had it so will in total will save 26,600

The contribution limits for a HTB ISA are £1,200 in the first month, followed by £200 per month. For a HTB ISA open for 25 months, the maximum balance is £6,000+interest with an entitlement to a £1,500 bonus. The maximum balance that attracts a bonus is £12,000 (£3,000 bonus). If the total savings are £26,600, either some of those savings are not in the HTB ISA, she's had it a lot longer than 25 months, or there is a mistake in that figure too.

The account was opened Nov 20. the 26,600 is the amount she will have deposited by Nov 29

masonic

ciccio01 said:

masonic said:

ciccio01 said:

masonic said:

Not if she intends to use the HTB ISA to buy her first home in the short term. A £3k bonus implies a £12k balance, meaning further contributions are not attracting any further bonus. A Lifetime ISA may be more attractive if she is definitely not going to buy before 6th April 2025, as she could transfer £4k per tax year from one to the other and at the start of the 2025/26 tax year (and each year thereafter) deposit a further £4k to receive £1k extra bonus. edit: if she's had it only 18 months, the maximum balance would be £4,600+interest and bonus only £1,150, so fully transferable to a LISA within this and next tax year, and could therefore be used just a year after opening with a balance of up to £10k including bonus

If she never intends to own a home, then the HTB ISA bonus is effectively beyond her reach and there would be no point in continuing with the HTB ISA when there are better paying options available, such as the one you highlight.

Sorry i made a mistake its 25  month shes had it so will in total will save 26,600

The contribution limits for a HTB ISA are £1,200 in the first month, followed by £200 per month. For a HTB ISA open for 25 months, the maximum balance is £6,000+interest with an entitlement to a £1,500 bonus. The maximum balance that attracts a bonus is £12,000 (£3,000 bonus). If the total savings are £26,600, either some of those savings are not in the HTB ISA, she's had it a lot longer than 25 months, or there is a mistake in that figure too.

The account was opened Nov 20. the 26,600 is the amount she will have deposited by Nov 29

In that case she should definitely compare with a LISA. If she moved the money across (£4k per tax year), she could get it all moved over by 6th April 2023, then top it up to £8k with a £2k bonus added on. In November 2029, she could have saved up to £32k of her money and earned a bonus of up to £8k. The LISA scheme also has a higher property value limit outside of London (£450k) and can be used towards the exchange deposit, which a HTB ISA bonus cannot.

There simply is no point continuing to contribute to a HTB ISA once the balance reaches £12k, as no further bonus will accrue. So whatever she does, she will eventually need to find an alternative account for the excess money, but in my view the higher LISA bonus is more valuable than extra interest achievable from other permutations of accounts.