We want to hear about your Lifetime ISA (LISA) experiences

EssBiem

I am having a bit of trouble comprehending the 25% withdrawal fee. Namely, does it ignore the interest you have accrued?

So for instance, if you depositied the 4k max for a year, got the 1k bonus and then withdrew, you would be down £250

But if you let it sit, until the interest was £5334 (just over 4k after -25%), would you then withdrawl essentially penalty free? Or is the -25% always calculated off what you actually deposited?

I'm regretting my lisa and wish i had thrown it at overpaying my mortgage / existing pension. But it kills me they will get anything out of me if i withdraw early.

eskbanker

EssBiem said:

I am having a bit of trouble comprehending the 25% withdrawal fee. Namely, does it ignore the interest you have accrued?

So for instance, if you depositied the 4k max for a year, got the 1k bonus and then withdrew, you would be down £250

But if you let it sit, until the interest was £5334 (just over 4k after -25%), would you then withdrawl essentially penalty free? Or is the -25% always calculated off what you actually deposited?

25% is deducted from the value of any withdrawal, rather than being related to the value of any deposits.

EssBiem said:

I'm regretting my lisa and wish i had thrown it at overpaying my mortgage / existing pension. But it kills me they will get anything out of me if i withdraw early.

But if you already had a mortgage, you presumably opened a LISA to save for retirement anyway, so if it's long-term money you knew you wouldn't be able to access penalty-free until 60, what's the regret about?  If you'd paid it into a pension, it would be even less accessible....

EssBiem

eskbanker said:

But if you already had a mortgage, you presumably opened a LISA to save for retirement anyway, so if it's long-term money you knew you wouldn't be able to access penalty-free until 60, what's the regret about?  If you'd paid it into a pension, it would be even less accessible....

That's true. Though I probably should have done more research into the alternatives at the time i opened my lisa.

My hunch however is once i hit 40 and can no longer switch provider my money will languish for 20 years on an interest rate that gets less and less competitive, that's where the worry lays.

someone

EssBiem said:

My hunch however is once i hit 40 and can no longer switch provider my money will languish for 20 years on an interest rate that gets less and less competitive, that's where the worry lays.

If your using it for retirement you should be using the S&S version of LISAs, the cash version is not really suitable. This was the crux of why banks had been somewhat shy of LISAs and so few LISA products been on the market. Banks feared they would be liable for mis-selling down the road.

eskbanker

someone said:

EssBiem said:

My hunch however is once i hit 40 and can no longer switch provider my money will languish for 20 years on an interest rate that gets less and less competitive, that's where the worry lays.

If your using it for retirement you should be using the S&S version of LISAs, the cash version is not really suitable. This was the crux of why banks had been somewhat shy of LISAs and so few LISA products been on the market. Banks feared they would be liable for mis-selling down the road.

I agree with your first sentence but don't recall anything about misselling fears being the main factor behind banks choosing not to offer LISAs, do you have anything that substantiates that?

CompulsiveSaver

I am one of those who was just under 40 years of age when the LISAs were released, so I opened one while I had the opportunity with a transfer in of £1, but so far I have been unimpressed.

I would really appreciate if they could be clear if they accept transfers of LISAs from the over 40s (I have made far too many phone calls where the person simply didn't know, and there must be a growing number of us), also do they accept transfers in from an existing Cash ISA providers? again, many don't know; I am not missing the opportunity to protect £20K from tax; so I am not paying the £4,000 LISA from this tax years ISA allowance!

The cash LISA rates are generally quite poor (sorry to Moneybox for lumping you in with the other providers), so effectively you are paying a chunk of your own Bonus via lower interest rates (the amount will depend on how long it is in the account, admittedly this does not affect S&S).

I am also a little surprised the rules did not allow the transfer in of old HTB ISAs as they are coming to the end of their life and haven't been current proposition for several years, but then Governments don't want to be too generous to younger people, after all they probably only have another 50+ years of voting ahead of them...  it would allow the providers to increase the funds under management quicker, so making it a more viable product for them.

RacingDriver

CompulsiveSaver said:

I would really appreciate if they could be clear if they accept transfers of LISAs from the over 40s (I have made far too many phone calls where the person simply didn't know, and there must be a growing number of us), also do they accept transfers in from an existing Cash ISA providers? again, many don't know; I am not missing the opportunity to protect £20K from tax; so I am not paying the £4,000 LISA from this tax years ISA allowance!

Lifetime ISAs are their own type of ISA, the others being Cash, Stocks and Shares, and Innovative Finance.  You can pay into one of each ISA type per financial year, with a maximum of £4,000 into a Lifetime ISA and an overall limit of £20,000 across all ISA types.  So you could for example, pay £4,000 into a Lifetime ISA and still pay £16,000 into a Cash ISA.

CompulsiveSaver

RacingDriver said:

CompulsiveSaver said:

I would really appreciate if they could be clear if they accept transfers of LISAs from the over 40s (I have made far too many phone calls where the person simply didn't know, and there must be a growing number of us), also do they accept transfers in from an existing Cash ISA providers? again, many don't know; I am not missing the opportunity to protect £20K from tax; so I am not paying the £4,000 LISA from this tax years ISA allowance!

Lifetime ISAs are their own type of ISA, the others being Cash, Stocks and Shares, and Innovative Finance.  You can pay into one of each ISA type per financial year, with a maximum of £4,000 into a Lifetime ISA and an overall limit of £20,000 across all ISA types.  So you could for example, pay £4,000 into a Lifetime ISA and still pay £16,000 into a Cash ISA.

Thanks Racing Driver, but the cash ISAs are currently paying a much better rate (so in my opinion, the best practice would be paying in to Cash ISA, then transfer to the LISA at the end of the tax year if using a cash LISA), and as the LISA was not well accepted by the providers, I am wondering what will be the next version of an ISA to be created after this one doesn't work very well...

eskbanker

CompulsiveSaver said:

I am also a little surprised the rules did not allow the transfer in of old HTB ISAs as they are coming to the end of their life and haven't been current proposition for several years

The rules do allow the transfer of HTB ISAs, albeit such transfers are still constrained by the same £4K limit as new LISA contributions, but during the first year of LISA's existence it was possible to transfer in HTB ISAs of any value, as a one-off opportunity, so those who didn't avail themselves of that missed out.

Perhaps worth noting that it was only 16 months between the launches of HTB ISAs and Lifetime ISAs (December 2015 and April 2017 respectively), so anyone continuing to fund a HTB ISA after April 2017 was painting themselves into a bit of a corner....

someone

eskbanker said:

someone said:

EssBiem said:

My hunch however is once i hit 40 and can no longer switch provider my money will languish for 20 years on an interest rate that gets less and less competitive, that's where the worry lays.

If your using it for retirement you should be using the S&S version of LISAs, the cash version is not really suitable. This was the crux of why banks had been somewhat shy of LISAs and so few LISA products been on the market. Banks feared they would be liable for mis-selling down the road.

I agree with your first sentence but don't recall anything about misselling fears being the main factor behind banks choosing not to offer LISAs, do you have anything that substantiates that?

It was widely reported at the time of introduction.

'Mis-buying' warning over lifetime Isa Former pensions minister Steve Webb questions suitability of the new government-backed Isa which comes with high exit penalties

 https://www.theguardian.com/money/2016/nov/14/mis-buying-warning-lifetime-isa-high-exit-penalties

Why NO bank will offer you a Lifetime Isa: Fears government's flagship savings deal for under 40s will be a catastrophic flop

https://www.thisismoney.co.uk/money/saving/article-4268846/Why-NO-bank-offer-Lifetime-Isa.html

Banks shun Lifetime Isa over mis-selling fears: THE Government’s Lifetime Isa scheme is in chaos as not a single high street bank is offering the accounts, amid fears they could result in a misselling scandal.