What can I do with H2B now I can't transfer to LISA?

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
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Usa2019Usa2019 Forumite
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edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
I have 10k on the H2B ISA and 12k on LISA

When I buy a house, which ISA should I use?

First thought was obviously LISA as that has more money in it.

But then I remember the 25% bonus has already gone in, where as the H2B hasn't.

If I don't use H2B for a house, all I got is just 2-3% interest for all these years.

Replies

  • eskbankereskbanker Forumite
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    So, ignoring interest, your total contribution has been £19.6K, boosted to £22K by the extra 25% on the LISA money.

    If you use the HTB (noting its lower property value cap), the £10K will be boosted to £12.5K, but the money in the LISA will be inaccessible until you're 60 unless you pay the 25% withdrawal charge that would take it down to £9K, total available now £21.5K.

    If you use the LISA, you'd access the full £22K, as there are no penalties for accessing the HTB money if not for a first property, so in terms of optimising your overall return this is slightly better.
  • Usa2019Usa2019 Forumite
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    If you use the LISA, you'd access the full £22K,

    When i do purchase a house, would I able to use both H2B and LISA?
  • AlexlandAlexland Forumite
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    Usa2019 wrote: »
    When i do purchase a house, would I able to use both H2B and LISA?

    Assuming the property purchase complies to the requirements of both schemes:

    You could use the LISA (with bonuses in the account and no penalties) and just withdraw the money from the HTB ISA without claiming the bonus (as you cannot claim a HTB ISA bonus if using a LISA + you would not be eligible to continue holding a HTB ISA after the purchase).

    Alternatively you could use the HTB ISA (and claim the bonus) and transfer the LISA to a S&S provider to invest until age 60 to help with retirement costs, etc.

    Alex
  • Usa2019Usa2019 Forumite
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    transfer the LISA to a S&S provider to invest until age 60 to help with retirement costs, etc.

    Any reason SS is better than LISA? On LISA I'm getting 25% bonus plus 5% on investment. (Although I know the money is stuck till 60)
  • AlexlandAlexland Forumite
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    Usa2019 wrote: »
    Any reason SS is better than LISA? On LISA I'm getting 25% bonus plus 5% on investment. (Although I know the money is stuck till 60)

    There are 2 types of LISAs - Cash or S&S - both have the 25% bonus on upto £4k pa.

    Cash LISAs generally return around 1% and are suitable for people buying qualifying properties in the next 5 years.

    S&S LISAs have a higher long term average return but suffer from market volatility depending on the investment. If you have been getting a return of around 5% after fees this suggests you already have a S&S LISA and are taking a level or risk that could cause short term losses of around 50%. This might be OK for the long term investor aged under 40 and aiming for age 60+ but not suitable for someone who might buy a property in the next 5 years as the risk of crystallising a loss is unacceptably high.

    Alex
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