Lifetime ISAs guide

eskbanker · 13 May 2017 at 12:44AM

Yes, you can open a LISA tomorrow (today now!) with a view to it being used for retirement funding, without it affecting, or being affected by, any first-time buyer arrangements (such as Help to Buy ISAs), so open a minimally-funded one while you have the chance. Worth reading http://www.moneysavingexpert.com/savings/lifetime-ISAs first though, rather than rushing into it on the last possible day without knowing exactly what you're doing....

And happy birthday for Sunday btw!

ian-d · 13 May 2017 at 11:37AM

Still unsure on the LISA, don't know why, no real logic aside from having two locked-down accounts with my SIPP. I know the boost from the gov is handy (though I don't believe it will last), and that having a pot of money that is instantly accessible as a lump sum at 60 to avoid a drawdown on the SIPP is useful, but I could put that £4k per year into the SIPP, recover the 20 odd % from the gov, and providing I'm smart, drawdown from the SIPP carefully to avoid tax at that point. Tricky whether having two locked-in accounts is a sensible approach for me personally.

Ed-1 · 13 May 2017 at 12:42PM

ian-d wrote: »

Still unsure on the LISA, don't know why, no real logic aside from having two locked-down accounts with my SIPP. I know the boost from the gov is handy (though I don't believe it will last), and that having a pot of money that is instantly accessible as a lump sum at 60 to avoid a drawdown on the SIPP is useful, but I could put that £4k per year into the SIPP, recover the 20 odd % from the gov, and providing I'm smart, drawdown from the SIPP carefully to avoid tax at that point. Tricky whether having two locked-in accounts is a sensible approach for me personally.

Putting the same money into a SIPP rather than a LISA is ridiculous. Both receive a 25% top-up (basic rate taxpayer) but the former is taxed when you take it out and the latter is not taxed at all.

There's also the possibility of the Government allowing penalty-free access to the LISA for other life events and 'borrowing' from the LISA penalty-free if the funds are fully repaid is still being considered so LISA is potentially much more flexible than the SIPP as well.

ian-d · 13 May 2017 at 3:21PM

Ed-1 wrote: »

Putting the same money into a SIPP rather than a LISA is ridiculous. Both receive a 25% top-up (basic rate taxpayer) but the former is taxed when you take it out and the latter is not taxed at all.

Yes, on a personal level, this is very true, so maybe taking money out of the LISA for the SIPP isn't the right approach, so the separation I guess has to be whether I'm happy to tie the money in to the LISA, or keep it invested but free from penalty in a S&S ISA.

The problem as you've pointed out is that the terms will be fluid, which doesn't help in any decision making on the product this year. If they change the rules so there is more flexibility in removing (providing you return it within the same tax year for example), it would at least give more wiggle room!

greenglide · 13 May 2017 at 4:45PM

Putting the same money into a SIPP rather than a LISA is ridiculous. Both receive a 25% top-up (basic rate taxpayer) but the former is taxed when you take it out and the latter is not taxed at all.

Currently only 75% of the pension is taxable on withdrawal.

It is generally by no means "ridiculous" but your individual circumstances may make one better than the other.

Ed-1 · 13 May 2017 at 4:50PM

ian-d wrote: »

Yes, on a personal level, this is very true, so maybe taking money out of the LISA for the SIPP isn't the right approach, so the separation I guess has to be whether I'm happy to tie the money in to the LISA, or keep it invested but free from penalty in a S&S ISA.

The problem as you've pointed out is that the terms will be fluid, which doesn't help in any decision making on the product this year. If they change the rules so there is more flexibility in removing (providing you return it within the same tax year for example), it would at least give more wiggle room!

Had George Osborne still been Chancellor until September last year (as was expected) I think that flexibility would already have been confirmed either in the pipeline or implemented at launch.

http://citywire.co.uk/wealth-manager/news/osborne-i-wanted-lifetime-isa-to-copy-401k/a934139

As it is, the policy wasn't finalised when the team that put it together left the Treasury on 13th July last year and these delays contributed to the lack of providers being ready to offer products at launch. Although there was evidence that the industry were against introducing this flexibility at launch due to the lack of time to get systems in place, they didn't succeed on that front anyway!

https://www.ftadviser.com/2016/05/11/investments/savings-and-isas/industry-blocks-treasury-plans-to-scrap-lisa-penalty-3fPVheguLvQoFwwCsjFcDO/article.html

Meanwhile Philip Hammond doesn't seem capable of making a decision on anything frankly given his two fiscal events so far which barely contained anything and he's now even abolished one of the two fiscal events that happen each year. He's a great Chancellor if you like the status quo.

http://citywire.co.uk/new-model-adviser/news/govt-to-pay-lifetime-isa-bonus-monthly/a948720

Hopefully the industry will get its act together and create a Lifetime ISA market as until that happens the Chancellor might be tempted to do with the policy what he seems happy to do with most things: nothing, and simply let it wither on the vine which would be a real shame.

ian-d · 13 May 2017 at 9:32PM

I'm sure the answer is yes, but for clarity, if I transfer the £4k within the ISA wrapper from my Cash ISA each year, will I still get the Gov bonus each year? I assume it doesn't count against new money only?

bowlhead99 · 14 May 2017 at 9:20AM

ian-d wrote: »

I'm sure the answer is yes, but for clarity, if I transfer the £4k within the ISA wrapper from my Cash ISA each year, will I still get the Gov bonus each year?

Yes

I assume it doesn't count against new money only?

The bonus is on money that is newly put into the LISA from outside a LISA. It doesn't matter if the 'outside a LISA' was another type of ISA or just a normal bank account.

You are basically putting money into the LISA scheme which is itself a subsection of the ISA scheme.

The ISA scheme allows only a max total of £20,000 new money per year across all types of ISAs and in that context, 'new money' is money that was not previously in an ISA.

Whereas the LISA scheme allows a max total of £4,000 new money per year to get the bonus and in that context, 'new money' is money that was not previously in a LISA.

ian-d · 16 May 2017 at 10:07AM

I'm interested to know of those that have a pension (company, SIPP or otherwise), and are fully loaded with a Cash or S&S ISA, who HAVEN'T taken up the LISA, their reasoning why? Something about the LISA doesn't sit right with me but I'm yet to understand my rationale aside from maybe not wanting to commit to another 'contribute and leave' product, even if I can just transfer £4k in from my other ISA's each year.

elce · 17 May 2017 at 8:42AM

Hi

I'm self-employed, 37 (birthday in June) and have no pension provision. I'm thinking about setting up an LISA but wanted to ask the forum when would be the best time to set it up?

- is there any benefit to setting it up immediately (and before my 38th birthday in June) while there are relatively few LISA products on the market - I was thinking about Hargreaves Lansdowne?

or

- is it better to wait for more products to come on stream as companies work out the rules and regs etc?

any advice much appreciated! I'm new to the forum and new to getting my finances sorted!

cheers!

Lifetime ISAs guide

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