Help to buy isa or lisa

Ch1ll1Phlakes

omaze said:

My son has worked really hard and has savings in atom fixed rate and an isa. Initially someone on holiday said "you should have a lisa" Which is why we have now looked in to it, and causing me a headache. I thought of doing the Plum one thinking stupidly he could have the interest monthly paid into his account like he does with his other accounts and the 4.60% is good at the moment the bonus is the 25% @ £1000 a year. Realistically the government would be giving £3000 if his plan to buy in 3 years. So is the interest married with the governments too at the time of purchase? sorry to be dim. The government are quite scary at the moment as well moving goal posts etc.. and it worries me how you have to be so careful at the time of purchase with solicitors releasing at the right time. But £3000 is a big help towards the fees otherwise I honestly wouldn't bother. I'm 61 should be retired but have to wait till 67 shafted by the government so angry.

Yes, the interest is in the LISA with the initial funds and the government bonus when your son will go to buy.

For example, in three years time he'll have been able to deposit £4000 x3 (£12000), he'll have received 3 corresponding bonuses of £1000 (£3000) plus he'll have the interest he has accrued including interest on those bonuses (yes this is true). Say with roughly £5000 extra in for each year at an interest rate of 4% he'd earned £200, £400 and £600 in interest tax-free. So hopefully in three years time he would have around £16200 (£12k+£3k+£1.2k) and all of this can be used towards his house purchase. This is just a rough estimate.

On the government moving goalposts, I think it's highly unlikely they change the LISA product in a way which makes it worse. At the moment the only real suggested changes such as changing the withdrawal penalty would be beneficial to every LISA holder.

You also mention worrying about timing the purchase with a solicitor. You're referring to the 90 days for completion after the LISA funds have got to your solicitor. You actually have up to 180 days but if (and only if) you needed the extra time your solicitor would need to write for the extra 90 extension. I've attached the relevant part of the MSE page about this. Most people will complete inside the 90 days and your solicitor will tell you when you need to move funds, just be sure to inform him that your son is using a LISA.

omaze

Thanks so much Ch1ll1Phlakes said: You've explained that so well.Really appreciated.

omaze said:

My son has worked really hard and has savings in atom fixed rate and an isa. Initially someone on holiday said "you should have a lisa" Which is why we have now looked in to it, and causing me a headache. I thought of doing the Plum one thinking stupidly he could have the interest monthly paid into his account like he does with his other accounts and the 4.60% is good at the moment the bonus is the 25% @ £1000 a year. Realistically the government would be giving £3000 if his plan to buy in 3 years. So is the interest married with the governments too at the time of purchase? sorry to be dim. The government are quite scary at the moment as well moving goal posts etc.. and it worries me how you have to be so careful at the time of purchase with solicitors releasing at the right time. But £3000 is a big help towards the fees otherwise I honestly wouldn't bother. I'm 61 should be retired but have to wait till 67 shafted by the government so angry.

Yes, the interest is in the LISA with the initial funds and the government bonus when your son will go to buy.

For example, in three years time he'll have been able to deposit £4000 x3 (£12000), he'll have received 3 corresponding bonuses of £1000 (£3000) plus he'll have the interest he has accrued including interest on those bonuses (yes this is true). Say with roughly £5000 extra in for each year at an interest rate of 4% he'd earned £200, £400 and £600 in interest tax-free. So hopefully in three years time he would have around £16200 (£12k+£3k+£1.2k) and all of this can be used towards his house purchase. This is just a rough estimate.

On the government moving goalposts, I think it's highly unlikely they change the LISA product in a way which makes it worse. At the moment the only real suggested changes such as changing the withdrawal penalty would be beneficial to every LISA holder.

You also mention worrying about timing the purchase with a solicitor. You're referring to the 90 days for completion after the LISA funds have got to your solicitor. You actually have up to 180 days but if (and only if) you needed the extra time your solicitor would need to write for the extra 90 extension. I've attached the relevant part of the MSE page about this. Most people will complete inside the 90 days and your solicitor will tell you when you need to move funds, just be sure to inform him that your son is using a LISA.

Ch1ll1Phlakes

omaze said:

Thanks so much Ch1ll1Phlakes said: You've explained that so well.Really appreciated.

omaze said:

My son has worked really hard and has savings in atom fixed rate and an isa. Initially someone on holiday said "you should have a lisa" Which is why we have now looked in to it, and causing me a headache. I thought of doing the Plum one thinking stupidly he could have the interest monthly paid into his account like he does with his other accounts and the 4.60% is good at the moment the bonus is the 25% @ £1000 a year. Realistically the government would be giving £3000 if his plan to buy in 3 years. So is the interest married with the governments too at the time of purchase? sorry to be dim. The government are quite scary at the moment as well moving goal posts etc.. and it worries me how you have to be so careful at the time of purchase with solicitors releasing at the right time. But £3000 is a big help towards the fees otherwise I honestly wouldn't bother. I'm 61 should be retired but have to wait till 67 shafted by the government so angry.

Yes, the interest is in the LISA with the initial funds and the government bonus when your son will go to buy.

For example, in three years time he'll have been able to deposit £4000 x3 (£12000), he'll have received 3 corresponding bonuses of £1000 (£3000) plus he'll have the interest he has accrued including interest on those bonuses (yes this is true). Say with roughly £5000 extra in for each year at an interest rate of 4% he'd earned £200, £400 and £600 in interest tax-free. So hopefully in three years time he would have around £16200 (£12k+£3k+£1.2k) and all of this can be used towards his house purchase. This is just a rough estimate.

On the government moving goalposts, I think it's highly unlikely they change the LISA product in a way which makes it worse. At the moment the only real suggested changes such as changing the withdrawal penalty would be beneficial to every LISA holder.

You also mention worrying about timing the purchase with a solicitor. You're referring to the 90 days for completion after the LISA funds have got to your solicitor. You actually have up to 180 days but if (and only if) you needed the extra time your solicitor would need to write for the extra 90 extension. I've attached the relevant part of the MSE page about this. Most people will complete inside the 90 days and your solicitor will tell you when you need to move funds, just be sure to inform him that your son is using a LISA.

No problem, glad to help. Hope you and your son get sorted and find a suitable property in three years or so. 

masonic

Ch1ll1Phlakes said:

clairec666 said:

Ch1ll1Phlakes said:

clairec666 said:

Ch1ll1Phlakes said:

Interest rates on both products aren't discussed much as the bonus is the key point and trumps all other savings. If interest is key for you or your son I'll not a few things.

1) You can't open a H2B ISA now so interest rates are poor due to lack of demand and the limited ability to transfer somewhere else.
2) LISA interest is competitive at the moment with a few accounts paying monthly interest over 4%.
3) Any interest which is withdrawn also pays the withdrawal 25%, i.e. if the LISA earned £200 in interest and you requested this to be withdrawn you'd only receive £150.

I'm struggling to find many decent rates - only three of them over 4%, and two of them have bonuses which drop after a year. Have you managed to find some which I've missed?

I say competitive (with respective to the rest of the savings market) as over 4% is pretty much where all savings are currently sitting. Looking at the MSE pages (and moneyfacts) the top easy-access and fixed rate accounts for both normal and ISA savings are around this level so arguably putting funds into a LISA at the moment will not cause any lost interest they could have got somewhere else. Even for the top LISA rates of 4.6% with Plum and 4.55% with Moneybox these rates should be competitive at least until their respective bonuses end.

On the point of one year bonuses, with many predicting rates to fall over the coming months many savings accounts will have lower rates this time next year. Fixed rates are predicted to act similarly so a LISA even for the next year should be relatively competitive. The only real accounts that outperform other savings at the moment are regular savings which are not really that suitable for saving for a house purchase.

Thanks for raising this point but hopefully the key thing for the OP and her son is that the 25% bonus on LISA savings will outstrip any other savings method for a house purchase irrespective of interest.

Thanks. I'm avoiding Plum and Moneybox despite the high rate, because a) I expect their underlying rate (i.e. without bonus) to fall if others fall, and b) as I'm approaching 40 I'm limited on options to transfer out. So that left me with Tembo, who so far have been okay.

I see your point about rates being similar to normal ISAs, but although the top LISAs are offering similar rates, there isn't the same amount of choice. Tembo advertise themselves as the highest rate without a bonus, but in reality they could drop their rate by at least 0.4% and still come out on top. And given that they just slashed their easy access ISA rate by a huge amount, I don't really trust them to keep their LISA rate too high. Without many competitors, they haven't got much of an incentive to offer over 4%. I'd like to see more providers come along in the hope that they will keep rates higher in order to attract customers.

Yes that's perfectly understandable. I think giving the OP's situation they will have more flexibility and choice than you will have. If I'm remembering correctly, it's been discussed on the forum before but there is limited providers for LISAs for a handful of reasons including
1. They're more complex than a normal ISA with reporting rules and the withdrawal penalty to deal with
2. They are age-restricted (i.e could be seen as age discrimination)

I think the main reason is that they could be deemed unsuitable for saving for retirement depending on your circumstances, so that would open the door to a misselling claim if a customer claimed to have opened one for that purpose.