LISAs - Is my logic correct?

neilmorgan

Not first time buyer so this is only about the using at 60 option.
I've got £1 in it.
I've been looking through the details and see that you can only deposit up to 50 years old and only draw from 60 years old.
So invest £4000 in my 50th year and draw with 25% bonus 10 years later. WIth compounding that equates to around 2.25 % interest.
If the LISA with a specific bank or building society is paying 1% annual interest on their LISA product then I'd only need to find an ISA paying above 3.25% to beat it?
What makes it so attractive? What am I missing?

Woodstok2000

Why would you pick a LISA paying 1%? Current best buys are 5-6%, and that pays on your £4000 plus the £1000 bonus.

To match that over 10 years you would need a regular isa paying at least 7%

dcs34

Further to the above the main "attractiveness" of it is building up several years of £4k + £1k bonuses for the hous deposit/retirement options. Back when interest rates were 0.1% the 25% Gov bonus was very much worth it!

masonic

If you use a LISA for retirement, then you should opt for a S&S LISA. Then you will get the same investment growth with 25% on top. Pension will still be slightly better for most people, but for those who already have a lot of pension savings and who are basic rate taxpayers (quite a small number of people), a LISA can be useful.

I opened my LISA in 2017 and transferred in £3,700 from my old HTB ISA, plus made 9 x £4k subscriptions so far, totalling £39,700 in contributions, earning all of which earned £9,925 of bonus and £49k of investment growth, which is a return (XIRR) of 13.5%pa including bonus or 9.8%pa excluding bonus. Well worth it in my eyes.

I don't have many more years to contribute to it, and the 10 years it will need to sit there before I can access it will close the gap between inc- and ex-bonus, but every little helps. I have also considerably derisked ahead of the final decade of this account, so going forward I'll be achieving inflation+2%. If I didn't want inflation protection, I could opt for SONIA (essentially base rate) +1% with very little risk or a guaranteed 5% locked in until I reach 60.