Eligibility Criteria for Lifetime ISAs

CoreCumbria90210

Dear all,

I have a question for the hopefully better-informed members of this community.
My friend and I are both looking into getting Lifetime ISAs. However, the MSE article on these gave us pause.

The article states that you aren't eligible for this ISA if you ever owned a house or a share of a house. My friend lost a parent in childhood and their inheritance money was put in a trust that could only be accessed pre-adulthood under very specific circumstances. Under the legal system of the country they lived in, these conditions were met when their mother needed extra money to buy a property for them to live in. My friend's inheritance money was used to help buy this property, and so they and their sibling were both officially co-owners of small shares of the property alongside their mother for a few years. The property was later sold and the money given back to the siblings.

Does this mean that they are not eligible for a Lifetime ISA? Or does that fact that this happened during their childhood and without their input count as a mitigating circumstance?

All insight into this is appreciated! The government website did not provide sufficient detail. Honestly, only the MSE article went into that detail.

Kim_13

They should point out their exclusion to their mother in the hope that she will make up the amount lost, as it was purely due to their money being used to help her when she needed it that the government now will not help them to get onto the property ladder. 

PennysIntoPounds

As far as I remember you have to nominate if you're saving for property or retirement, so if your friend was looking into it to get the boost for future property then it's unlikely they would be eligible, though as those are unusual circumstances your friend would be best advised to get in touch with the provider they choose directly. I'm with Moneybox who I've found helpful on the rare occasions I've needed to contact them.
If they're opening it for boosted savings for when they reach 60 then having owned property wouldn't affect their eligibility.
I'm sure you're aware but you can't open a LISA after you've turned 40 so if you or your friend are 39 then don't put it off!

masonic

PennysIntoPounds said:

As far as I remember you have to nominate if you're saving for property or retirement,

Only if the provider is being nosey. The test for being a first time buyer (to waive the withdrawal penalty) comes if and only if a withdrawal is attempted prior to the age of 60 and is administered by the conveyancer. Eligibility to open a LISA is based on age and whether the applicant is UK resident. Though it would be unwise to use a LISA towards saving for a property if you previously owned a legal interest in a property. Provider allowing the account to be opened should not be taken as a green light to using it for this purpose, even if provider says it will be ok.

hpas251

CoreCumbria90210 said:

Dear all,

I have a question for the hopefully better-informed members of this community.
My friend and I are both looking into getting Lifetime ISAs. However, the MSE article on these gave us pause.

The article states that you aren't eligible for this ISA if you ever owned a house or a share of a house. My friend lost a parent in childhood and their inheritance money was put in a trust that could only be accessed pre-adulthood under very specific circumstances. Under the legal system of the country they lived in, these conditions were met when their mother needed extra money to buy a property for them to live in. My friend's inheritance money was used to help buy this property, and so they and their sibling were both officially co-owners of small shares of the property alongside their mother for a few years. The property was later sold and the money given back to the siblings.

Does this mean that they are not eligible for a Lifetime ISA? Or does that fact that this happened during their childhood and without their input count as a mitigating circumstance?

All insight into this is appreciated! The government website did not provide sufficient detail. Honestly, only the MSE article went into that detail.

They would not be barred from opening a Lifetime ISA, assuming they are aged 18 to 39. However, they would only be able to withdraw without paying a penalty charge when aged 60 or over or if terminally ill with less than a year to live. If a person has owned property anywhere in the world (even if not living in the property) they are ineligible to use the Lifetime ISA for buying property without paying the penalty charge.

CoreCumbria90210

Hi all,

We followed PennysIntoPounds' advice and asked Moneybox directly. As you all anticipated, my friend is ineligible for a first-time property buyer oriented Lifetime ISA, which while reasonable does seem a bit unfair given the circumstances. Do you have any other property-buying-oriented financial schemes you could recommend for them to get a boost towards the property ladder?

PennysIntoPounds

Ah that is a bit unfair but eligibility has to be consistently followed I suppose.

More knowledgeable people than me will be able to advise on any current schemes available, but I'll just add that if you or your friend have a quid spare it's worth opening a LISA before you turn 40 anyway, as once the account is open it stays open, and gives you that extra boosted saving opportunity for the future

Kim_13

I would personally set the bar at you have owned 50% of a property, but as the government are yet to even uprate the thresholds or to waive the 6.25% penalty on first time property purchases which would have qualified in 2017 but now do not due to said thresholds or changed circumstances (e.g. inherited a share in a property before they could buy), it’s not a change they’re ever likely to make.

Clearly the stipulation needed to be there to encourage people to think seriously before buying, e.g. if you rush into buying a property with a partner, it isn’t for the state to subsidise an onward purchase when things go sour. It is very unfair on people who owned tiny shares, as that meant it’s not like they had somewhere that they could have stayed. Especially minors, who had no control over whether they owned property or not as the decision was made for them.