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LISA opening when already used allowance

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Hi all,

I’ve recently found out about LISAs for retirement (I thought was just for 1st house) so really want one however I’ve already put my allowance into my ISA this year and I’m 40 in a few weeks. 

Can I open and move it from my existing ISA? Although not ideal as it’s a fixed so better, Could I open now but not put money in until next tax year?

any guidance would be appreciated please :)

Comments

  • Mark_d
    Mark_d Posts: 2,407 Forumite
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    If you have already used your entire 20k allowance for this financial year then you can't open a LISA this financial year
  • eskbanker
    eskbanker Posts: 37,211 Forumite
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    edited 16 January 2024 at 1:29PM
    Mark_d said:
    If you have already used your entire 20k allowance for this financial year then you can't open a LISA this financial year
    That's not true - there are a few possibilities, albeit the first couple would entail early access penalties:
    1. If the existing ISA has pre-2023/24 money in it, make a partial transfer (if allowed by the existing provider)
    2. If the existing ISA is exclusively 2023/24 money then transfer it in full to another cash ISA and make a partial transfer into a new LISA from there, or a withdrawal/deposit if it's a flexible cash ISA
    3. As suggested by OP, open the LISA immediately before turning 40 and then delay funding it until after 6 April (would need to check with the relevant provider whether that gap is short enough to avoid it being closed as unfunded)
    However, OP should consider whether LISA is tempting enough to outweigh using pension contributions instead:

    https://www.moneysavingexpert.com/savings/lifetime-isas/#pension-2

    Edit: as below, option 3 isn't valid.
  • Mark_d
    Mark_d Posts: 2,407 Forumite
    1,000 Posts Second Anniversary Name Dropper
    edited 16 January 2024 at 12:38PM
    eskbanker said:
    Mark_d said:
    If you have already used your entire 20k allowance for this financial year then you can't open a LISA this financial year
    That's not true - there are a few possibilities, albeit the first couple would entail early access penalties:
    1. If the existing ISA has pre-2023/24 money in it, make a partial transfer (if allowed by the existing provider)
    2. If the existing ISA is exclusively 2023/24 money then transfer it in full to another cash ISA and make a partial transfer into a new LISA from there, or a withdrawal/deposit if it's a flexible cash ISA
    3. As suggested by OP, open the LISA immediately before turning 40 and then delay funding it until after 6 April (would need to check with the relevant provider whether that gap is short enough to avoid it being closed as unfunded)
    However, OP should consider whether LISA is tempting enough to outweigh using pension contributions instead:

    https://www.moneysavingexpert.com/savings/lifetime-isas/#pension-2

    Can you do a transfer/partial transfer from a cash/S&S ISA into a LISA?  I didn't know this is possible but I think this is the way to go.
    https://www.gov.uk/lifetime-isa
    According to official website a LISA must receive the first payment before you turn 40, so option (3) is certainly a non-starter.

  • eskbanker
    eskbanker Posts: 37,211 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Mark_d said:
    Can you do a transfer/partial transfer from a cash/S&S ISA into a LISA?  I didn't know this is possible but I think this is the way to go.
    Yes:

    Transfer from an ISA to a Lifetime ISA and partial transfers

    Investors can transfer previous year payments to a Lifetime ISA from a different type of ISA (for example, from a cash ISA to a Lifetime ISA). The value transferred to the Lifetime ISA will count towards the £4,000 annual Lifetime ISA payment limit but not the overall ISA payment limit for the tax year.

    Partial transfers from previous year’s ISA payments are permitted however when the transfer includes current year payments, this must be transferred in full. This will count towards the overall ISA payment limit.

    https://www.gov.uk/guidance/transfer-lifetime-isas-between-managers
  • masonic
    masonic Posts: 27,269 Forumite
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    Part of option 2 isn't valid. Transferring current year contributions in full to another cash ISA does not change the fact that they are current year contributions and must be transferred in full to the LISA (which the LISA cannot accept). Transfer to a flexible cash ISA, followed by flexible withdrawal and deposit would be ok though.
  • Thank you so much!
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