Lifetime ISAs guide

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  • Forrest87
    Forrest87 Posts: 7 Forumite
    eskbanker wrote: »
    The definition isn't any more specific than 'owning an interest' but of course there is always the broader issue of whether someone who already has a property should use a technicality to seek taxpayer assistance to buy another one anyway....

    And there it is:

    "(C) (ii) which entitles me to possess or occupy that land".

    Regards the "technicality" debate, he doesn't actually own anything via this method. He has a "right to use/benefit from" which could just as easily be removed. Parents often use this route to buy property near Universities for their offspring. As the elder one completes their studies and flies the nest, the "Life Interest" is changed to the next in line and so on.
  • I know there are a lot of hypotheticals involved in answering this question as a lot of the investment opportunities have not been decided however I was hoping to get advice any way.

    I have a H2B ISA and was considering opening a S&S LISA with HL on 6th April. I understand that anything put in to the H2B after April 2017 will count towards my LISA limit too, therefore does it not make sense to transfer the H2B in to the LISA at the beginning of the financial year and having more capital to invest in the S&S LISA and still being able to get the 25% on both sums of money at the end of the 2017/18 financial year.
  • masonic
    masonic Posts: 23,062
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    rogiewon wrote: »
    I have a H2B ISA and was considering opening a S&S LISA with HL on 6th April. I understand that anything put in to the H2B after April 2017 will count towards my LISA limit too, therefore does it not make sense to transfer the H2B in to the LISA at the beginning of the financial year and having more capital to invest in the S&S LISA and still being able to get the 25% on both sums of money at the end of the 2017/18 financial year.
    If you are investing, then on average you'd expect a better outcome if you invest earlier rather than later. You'd also expect your investments to perform better than cash on average. So an argument can certainly be made for transferring in as soon as possible.
  • masonic wrote: »
    So an argument can certainly be made for transferring in as soon as possible.

    That is what I thought. The only issue I could see is if there are any "bumps" which have not come back round before wanting to buy a home as I will not be looking to hold on to the LISA until I get to pensionable age.
  • Forrest87
    Forrest87 Posts: 7 Forumite
    After much research, my plan of approach for my son is as follows:

    On April 6th, open a LISA with Hargreaves & Lansdown and immediately transfer his full H2B balance closing the account.

    I have then decided to invest in a Vanguard LifeStrategy 100% Equity Accumulation (GBP) Fund and continue to contribute monthly on that basis.

    I will most likely split his H2B balance (just shy of £4,300) into 12 increments and spread them over the 12 months along with any new contributions.

    The ongoing fees are only 0.22% and given that he's only 19, I'm prepared to go with the 100% equity risk approach. I add, this is just for Retirement savings as he can't use the LISA to purchase a property.

    Any thoughts?????
  • masonic
    masonic Posts: 23,062
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    rogiewon wrote: »
    That is what I thought. The only issue I could see is if there are any "bumps" which have not come back round before wanting to buy a home as I will not be looking to hold on to the LISA until I get to pensionable age.
    Obviously the sooner you want to buy, the more risky that is. If you are comfortable delaying your purchase for a few years if there is a major crash, then you could make a rational decision to take on the risk. You do need to be fairly relaxed about your timelines, though. Most would want to play it safe and stay in cash.
  • masonic
    masonic Posts: 23,062
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    Forrest87 wrote: »
    The ongoing fees are only 0.22% and given that he's only 19, I'm prepared to go with the 100% equity risk approach. I add, this is just for Retirement savings as he can't use the LISA to purchase a property.

    Any thoughts?????
    The ongoing fees will be more than 0.22% because you also need to account for the platform fee, which will presumably be 0.45% at HL. But this is still fairly good value at least for the first few years.

    If he's 19, then you're looking at a 40 year time horizon, so 100% equities is reasonable, especially as the best lower risk investment options would probably be available outside of the LISA if he wished to lower the overall risk of his investments.
  • Forrest87
    Forrest87 Posts: 7 Forumite
    Thanks Masonic.

    I guess you could be right although it's difficult to find at the moment, but their charges & savings are currently listed as:
    Annual charges
    Performance fee: No !
    Ongoing charge (OCF/TER): 0.22%
    Ongoing saving from HL: 0.00%
    Net ongoing charge: 0.22%.

    I sort of Trust Vanguard from what I've read, so figured this to be a fair approach.
  • masonic
    masonic Posts: 23,062
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    Forrest87 wrote: »
    Thanks Masonic.

    I guess you could be right although it's difficult to find at the moment, but their charges & savings are currently listed as:
    Annual charges
    Performance fee: No !
    Ongoing charge (OCF/TER): 0.22%
    Ongoing saving from HL: 0.00%
    Net ongoing charge: 0.22%.

    I sort of Trust Vanguard from what I've read, so figured this to be a fair approach.
    Here are the standard ISA charges: http://www.hl.co.uk/investment-services/isa/savings-interest-rates-and-charges
    LISA will probably be the same.
  • DSA_2
    DSA_2 Posts: 12 Forumite
    edited 4 April 2017 at 9:28PM
    I have two questions regarding LISAs:

    1) The MSE guide here states that the minimum investment with Nutmeg is £100 lump sum, however Nutmeg's website appears to suggest that it is £500, with an additional recurring contribution of £100 per month for investments below £5000. Which is correct? (are there special terms for their LISA product?)

    2) For those looking to purchase a house in just over a year from now, is the advice to invest in a S&S LISA ASAP "to start the clock ticking", and then transfer to a cash LISA when they become available correct. Clause 1.28 bullet point 3 refers of the Lifetime ISA: Updated design note:

    "Where an individual withdraws savings from a Lifetime ISA to make a first home purchase, the withdrawal must be at least 12 months after the first subscription into the Lifetime ISA. This 12 month period applies to each Lifetime ISA account that an individual opens and equally applies to funds transferred from a Help to Buy: ISA." (My bold)

    Does this mean that the clock restarts if you transfer to a Cash LISA, or if you transfer in a HTB:ISA?? My understanding is that in order to transfer funds to a new ISA you have to "open a new account" with the new provider first. Many thanks.
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