MSE News: Martin Lewis: Is a Lifetime ISA win coming in the Budget?

eskbanker

MSE_Helen_K said:

WillPS said:

This is great news.

To be really pedantic, there's still a (tiny) penalty, I think. Worked example - LISA with 2 years of full contributions, each added on the first day of each tax year for the sake of easy numbers, imagined flat interest rate of 2%

Tax year 22/23 - £4k in April 5th 2022 - . HMRC add £1k end of May.
April 4th 2023 balance is £4000 + £80 (interest) + £1000 + £16.50ish (interest on govt top up) = £5096.50

Tax year 23/24 - - £4k in April 5th 2023 - . HMRC add £1k end of May.
April 4th 2024 £5096.50 for this years (as above) + £5198.50ish (last year's with interest added) = £10294.

Then withdraw April 5th 2024, penalty of 20% taken - redemption value of £8235.20.

If the same deposits were paid at the same time in to a standard cash ISA with the same interest, the redemption value would be £4161.60 + £4080 = £8241.60. 

Still, it'll mean the risk element is gone, which I welcome.

Thanks for flagging this WillPS - it's a really interesting point. 

It's caused by the delay in paying the bonus, which therefore doesn't earn a full year's interest - the effect would be less pronounced if choosing deposit dates later in the bonus payment monthly cycle, e.g. 5 May instead of 6 April, but there will always be a bit of a discrepancy, in that £4K * 1.02 will always be more than 80% of ((£4K * 1.02) + (£1K * 1.01something)).

Hawley_Gryphon

This news is probably welcome to some people, particularly those looking to buy a property down south where they're selling them for silly money, but for me the real issue with the LISA is the fact that now I've been migrated across from Working Tax credit to Universal Credit, my LISA savings are factored into their analysis of my financial circumstances and consequently I will lose access to all benefits after the 12 month transition period is over because I have more than £16,000 in there.

If there are any rule changes due to be announced about the lifetime ISA then I for one would be very glad to hear of them removing LISA savings from the equation for Universal Credit. It just doesn't seem right to be scrimping and saving and encouraged by the government into putting money away into a LISA which you can't access unless you're buying a house (or retiring) only to then be penalised by the government for having it! £16,000 might be enough to disqualify you from Universal Credit, but it certainly isn't enough to buy a house!

Hawley_Gryphon

It all seems to have gone quiet on here...

eskbanker

Hawley_Gryphon said:

It all seems to have gone quiet on here...

There's a limit to how much speculation there can be about something that may or may not happen, and your point yesterday was more of a Universal Credit issue than a LISA one as such, so might attract more comment on the benefits board?

masonic

Hawley_Gryphon said:

This news is probably welcome to some people, particularly those looking to buy a property down south where they're selling them for silly money, but for me the real issue with the LISA is the fact that now I've been migrated across from Working Tax credit to Universal Credit, my LISA savings are factored into their analysis of my financial circumstances and consequently I will lose access to all benefits after the 12 month transition period is over because I have more than £16,000 in there.

If there are any rule changes due to be announced about the lifetime ISA then I for one would be very glad to hear of them removing LISA savings from the equation for Universal Credit. It just doesn't seem right to be scrimping and saving and encouraged by the government into putting money away into a LISA which you can't access unless you're buying a house (or retiring) only to then be penalised by the government for having it! £16,000 might be enough to disqualify you from Universal Credit, but it certainly isn't enough to buy a house!

This issue could be solved by making them inaccessible to customers until they reach the age of 60, similar to pensions. Then savers have no recourse to the funds when on means-tested benefits. It is the fact that they *can* be accessed at any time for any reason that makes them part of the means-test. Conveyancers could still apply to withdraw funds to be used towards a first time property purchase, but the customer could not withdraw anything. Then the penalty becomes irrelevant.

However, I don't think that would be a popular move.

WillPS

Is this not, in fact, in the budget? I didn't hear anything about it in the speech.

eskbanker

WillPS said:

Is this not, in fact, in the budget? I didn't hear anything about it in the speech.

No, it didn't make it, based on what's published at https://assets.publishing.service.gov.uk/media/65e8578eb559930011ade2cb/E03057752_HMT_Spring_Budget_Mar_24_Web_Accessible__2_.pdf

WillPS

I thought it'd be a cheap bit of crowd pleasing, unless the revenue the treasury are receiving from those penalties is so significant now... a damning indictment if so.

WillPS

https://twitter.com/MartinSLewis/status/1765372465155354870

Alexland

All they had to do was increase the LISA property price cap to reflect house price inflation and/or put a new conveyancer withdrawal process with a 20% penalty for buyers that would otherwise be making a qualifying property purchase. Would have cost them peanuts and been a very nice thing to do for people who get into these unfortunate situations when saving up to buy their first property.