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  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 16th Mar 16, 5:06 PM
    • 75Posts
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    MSE Helen Saxon
    Lifetime ISAs guide
    • #1
    • 16th Mar 16, 5:06 PM
    Lifetime ISAs guide 16th Mar 16 at 5:06 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you haven't already, join the forum to reply.


    Thanks folks,
    Last edited by MSE Andrea; 14-05-2018 at 1:33 PM.
Page 67
    • Alexland
    • By Alexland 10th Feb 18, 7:56 PM
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    Alexland
    Yes 2100 makes sense as my contributions were the 1st of the month. It's the interest part that's confusing me as Skipton have told me I can add 2100.
    Originally posted by Kreacher
    That's because your old HTB ISA provider have not told them the amount of interest earned during this tax year. If you have no records the I suggest you contact Skipton and ask them to clarify with your old provider and let us know how that goes?

    Alex
    • NevvyC
    • By NevvyC 10th Feb 18, 11:43 PM
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    NevvyC
    Don't confuse the exchange deposit (the money you agree to give the seller in advance) with the mortgage deposit (the proportion of the property you will own, that defines the LTV ratio). You will also need some cash to pay initial fees which should not come from the LISA.

    Alex.[/QUOTE]


    LISA can be used for either (or both) though, right ...? At least I think I read that somewhere

    (Including govt bonus...)
    • NevvyC
    • By NevvyC 10th Feb 18, 11:50 PM
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    NevvyC
    Keep it simple - on any given day you want your money in the best place to earn the best interest rate and then towards the end of the tax year you want to move it into the LISA for the 25% bonus. As long as you are getting around 1% or more you are doing better than the LISA with earlier bonus scenario.

    Yes your high interest strategy is likely to use a mix of Regular Savers and other savings accounts.

    Alex.
    Originally posted by Alexland

    Well sure, that's what the exact strategy I have implemented and normally (under regular circumstances) I'd be inclined to agree and think the same, what has been throwing me is the second (and following...) bonuses -- as they could be achieved sooner (rather than later) by investing a new 4K ASAP at the start of the next tax year (ergo, releasing the 1K bonus also rather than later...) which then (at least in Skipton) all earns that 0.75% ... However, this would only be an additional 7.50 per annum (on the 1K bonus at least) in terms of interest - and I'm assuming doesn't outweigh the strategy we've been discussing of earning interest at higher rates (reg saver 5% / current account 3%'s) on the highest possible capital before capping in those respective accounts ? ...but again, the 0.75% is COMPOUNDING / CUMULATIVE - meaning it's a much harder calculation at the end of the day to decipher which is the harder working strategy re. 'free' money , no ?
    • Alexland
    • By Alexland 11th Feb 18, 8:41 AM
    • 2,389 Posts
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    Alexland
    LISA can be used for either (or both) though, right ...? At least I think I read that somewhere (Including govt bonus...)
    Originally posted by NevvyC
    Yes the LISA can buy used for both exchange deposit (if required) and/or mortgage deposit. We have bought 4 properties (down to 1 again now) and never had to give the seller an exchange deposit as we have always exchanged and completed on the same day.

    Although I try and help with lots of FTB LISA questions (using my experience of property transactions) my main LISA interest is S&S investing for retirement.

    Alex
    Last edited by Alexland; 11-02-2018 at 9:05 AM.
    • Alexland
    • By Alexland 11th Feb 18, 8:49 AM
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    Alexland
    ..but again, the 0.75% is COMPOUNDING / CUMULATIVE - meaning it's a much harder calculation at the end of the day to decipher which is the harder working strategy
    Originally posted by NevvyC
    The interest rate difference is substantial enough that it's clearly more interest to have the money earning say 3% or 5% than an extra 25% of the money earlier earning 0.75% interest. As such contribute to the cash LISA towards the end of the tax year.

    1000 at 3% would be 30 annual interest
    1250 at 0.75% would be 9.38 annual interest

    Don't get confused by the compounding - it's about how much money you will have at the point of making next year's LISA contribution. You don't get a bonus on the growth within a LISA anyway so it doesn't matter if the interest occurs inside the LISA wrapper or not. Just because the interest is outside the LISA doesn't mean you are going to spend the money. Ok some people might.

    Infact if the interest is outside the wrapper you could probably save it in future years elsewhere at a better interest rate and it will of course compound. Or stick the interest earned elsewhere into the LISA for a 25% bonus if you were not otherwise going to be able to add the full 4k.

    Do a spreadsheet if you don't believe me.

    Alex
    Last edited by Alexland; 11-02-2018 at 9:16 AM.
    • Sid999
    • By Sid999 11th Feb 18, 12:14 PM
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    Sid999
    Hi I wonder if anyone can advise, it is proving to get an answer from HMRC and building society. I have a help to buy ISA and would like to switch to a LISA as I am buying my first house and will be able to save more and receive a larger bonus. However, the property is a new build to be completed in 2020 but I need to exchange in 28 days. If I exchange and only had my Lisa for less than a month will that prevent me receiving the bonus in two years time when I complete the purchase? Any advice appreciated. Regards
    • Brian8G
    • By Brian8G 11th Feb 18, 12:33 PM
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    Brian8G
    Hi all. I am looking for a way to save for the future and retirement. I have no paid income, and therefore cannot pay into a Pension Scheme. Is a Lifetime ISA a good option or a Cash ISA in general, as I would like to make regular deposits? Do you have any other suggestions please? Regards.
    • Alexland
    • By Alexland 11th Feb 18, 2:19 PM
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    Alexland
    Hi I wonder if anyone can advise, it is proving to get an answer from HMRC and building society. I have a help to buy ISA and would like to switch to a LISA as I am buying my first house and will be able to save more and receive a larger bonus. However, the property is a new build to be completed in 2020 but I need to exchange in 28 days. If I exchange and only had my Lisa for less than a month will that prevent me receiving the bonus in two years time when I complete the purchase? Any advice appreciated. Regards
    Originally posted by Sid999
    I just double checked the HMRC ISA Managers Guide for you - the LISA needs to be open 12 months from the initial contribution before money can be withdrawn without penalty and with bonus towards a qualifying property purchase.

    So provided you don't need to withdraw to pay the exchange deposit (use money from elsewhere) then you are fine to continue contributing to the LISA and use it in 2020 to purchase the property.

    Alex
    • Alexland
    • By Alexland 11th Feb 18, 2:36 PM
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    • 1,791 Thanks
    Alexland
    Hi all. I am looking for a way to save for the future and retirement. I have no paid income, and therefore cannot pay into a Pension Scheme. Is a Lifetime ISA a good option or a Cash ISA in general, as I would like to make regular deposits? Do you have any other suggestions please? Regards.
    Originally posted by Brian8G
    Even if you have no relevant earnings you are allowed to pay up to 2880 into a personal pension up to age 75 and the government will add a 25% contribution to bring the total up to 3600 per tax year. However a pension will potentially be taxed on withdrawal in future as income.

    If you are under 40 a LISA allows you to pay in up to 4000 per year for a 25% bonus up to 1000 per tax year until age 50 however the money will not be taxed on withdrawal so may be a better choice. I don't know your full circumstances so cannot comment on suitability. It is worth remembering that a LISA has a penalty to withdraw before 60 and might affect entitlement to means tested benefits.

    If saving for retirement in a pension or LISA then cash would not keep up with inflation. It gives you certainty that your spending power will be erroded. Stocks & Shares would be a much more suitable choice. Inflation is running at 3% and Skipton are paying 0.75%. Skipton even warn you not to use their LISA for retirement saving on their website.

    S&S are more volatile as the price goes up and down so many people have a mixed portfolio of Shares and Bonds which are mostly uncorrelated to provide stability. However there will still be some ups and downs.

    If making regular contributions you might want to consider a Hargreaves Lansdown S&S LISA who charge a 0.45% platform's fee and have excellent customer services.

    Given this is a 20 year+ investment you might want to consider the HSBC Global Strategy Balanced fund (0.19% fund fee) or the more adventurous Blackrock Consensus 85 fund (which is discounted on HL to a 0.09% fund fee). HL might try and guide you to their Portfolio funds but the fees are really high.

    Alex
    Last edited by Alexland; 11-02-2018 at 2:40 PM.
    • Kyle_88
    • By Kyle_88 11th Feb 18, 3:14 PM
    • 6 Posts
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    Kyle_88
    Hi,


    I am looking for a little advice on LISA's and purchasing a 1st home.


    I opened a H2B ISA when they first started and I opened a LISA when they first started last year to get the 1 year clock ticking.


    I am fairly close to completion on my first home but I want to maximise the amount the Government will help me with and the seller will wait until early April to complete if I can maximise the amount I can claim.


    This is what I hope to do:


    In March transfer all of the H2B ISA into the LISA and top up the LISA with the extra 1600 to use the full 4k allowance. In April I will put another 4k into the LISA to max that years allowance.


    I will then use this to buy the house in April and hope to claim 25% on the full amount in the LISA. Will this work? Or do I have to wait longer to claim the full bonus?


    Thanks,


    Kyle
    • Alexland
    • By Alexland 11th Feb 18, 8:18 PM
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    Alexland
    Kyle,

    LISAs work differently to HTB ISAs - with a LISA the bonus is added into the account by the LISA provider with the first bonus due in late April or early May. The bonus on an early contribution in the next tax year should arrive in May or June. You solicitor doesn't claim the bonus but withdraws the account balance which may already contain a bonus.

    Can you seller really wait this long? What if the processing of either LISA bonuses is delayed as this has never happened before? I suspect Skipton are going to hit problems as they have not been recording the interest earned on HTB transfers correctly.

    Also if you want to initiate a transfer to Skipton the deadline for this tax year is the end of this month.

    To be honest it sounds like you are best just using the HTB if you are already near completion rather than put people's lives on hold for months.

    Alex.
    Last edited by Alexland; 11-02-2018 at 8:24 PM.
    • NevvyC
    • By NevvyC 12th Feb 18, 11:51 AM
    • 60 Posts
    • 3 Thanks
    NevvyC
    Yes the LISA can buy used for both exchange deposit (if required) and/or mortgage deposit. We have bought 4 properties (down to 1 again now) and never had to give the seller an exchange deposit as we have always exchanged and completed on the same day.

    Although I try and help with lots of FTB LISA questions (using my experience of property transactions) my main LISA interest is S&S investing for retirement.

    Alex
    Originally posted by Alexland

    So do the bank pay the seller a proportion of the value of the property in this instance then (if an exchange deposit isn't required...?) Otherwise where are they seeing (deposit) money from (if the LISA can be used for either, and for example, you follow that practice of exchanging and completing on the same day... And the LISA is working towards the mortgage (deposit?) to decrease the LTV ratio as you previously mentioned... Where are the sellers seeing from ?)

    Just finding it all a little confusing at this stage - obviously, having never purchased a property myself; thanks for any insight and apologies if my questions seem trivial!
    • NevvyC
    • By NevvyC 12th Feb 18, 11:57 AM
    • 60 Posts
    • 3 Thanks
    NevvyC
    The interest rate difference is substantial enough that it's clearly more interest to have the money earning say 3% or 5% than an extra 25% of the money earlier earning 0.75% interest. As such contribute to the cash LISA towards the end of the tax year.

    1000 at 3% would be 30 annual interest
    1250 at 0.75% would be 9.38 annual interest

    Don't get confused by the compounding - it's about how much money you will have at the point of making next year's LISA contribution. You don't get a bonus on the growth within a LISA anyway so it doesn't matter if the interest occurs inside the LISA wrapper or not. Just because the interest is outside the LISA doesn't mean you are going to spend the money. Ok some people might.

    Infact if the interest is outside the wrapper you could probably save it in future years elsewhere at a better interest rate and it will of course compound. Or stick the interest earned elsewhere into the LISA for a 25% bonus if you were not otherwise going to be able to add the full 4k.

    Do a spreadsheet if you don't believe me.

    Alex
    Originally posted by Alexland

    Thanks very much. Sometimes it all just gets messy and it's good to get someone else's perspective on it who can clarify ! No spreadsheet necessary - I do (and did) believe you! Just needed to work through it all categorically to make sure was on the same page with each point, so thanks for persevering and the advice.

    The part about the wrapper was especially helpful; and yes, perhaps the difficult part would be having the restraint to keep from using the interest dividends when outside the realm of LISA where you would otherwise be penalised ! So that's an incentive for keeping it in there, but one that wouldn't outweigh all that extra interest potential outside the wrapper like you state!

    Thanks again.


    EDIT: I think the complication largely gets introduced with timing ... (Considering, say, the 5% starts at zero balance: 0 ... 250 ... 500 ... 750 ... 1K) then that takes 4months just to get to the 1K mark (through restrictions of the account limits) which conversely you could just throw the same 1K into the LISA and get 0.75% from the get-go -- say for example, if you ended up purchasing a property 4 months into the new tax year; then would the LISA at 0.75% have ended up earning more interest than the 250 increments at 5% ... ? This is what goes on in my head haha.

    However, "drip-feeding" those 250 increments from a 3% current account to the 5% regular saver may outweigh this (potential) issue ; and is precisely how I have been saving for the initial 4K going into my LISA next month
    Last edited by NevvyC; 12-02-2018 at 12:04 PM.
    • Alexland
    • By Alexland 12th Feb 18, 12:46 PM
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    • 1,791 Thanks
    Alexland
    So do the bank pay the seller a proportion of the value of the property in this instance then (if an exchange deposit isn't required...?) Otherwise where are they seeing (deposit) money from (if the LISA can be used for either, and for example, you follow that practice of exchanging and completing on the same day... And the LISA is working towards the mortgage (deposit?) to decrease the LTV ratio as you previously mentioned... Where are the sellers seeing from ?)

    Just finding it all a little confusing at this stage - obviously, having never purchased a property myself; thanks for any insight and apologies if my questions seem trivial!
    Originally posted by NevvyC
    If no exchange deposit is required then it's nice and simple. Your lender will send your solicitor the amount your have arranged from the mortgage. You will have already asked the solicitor to draw upon the LISA and probably given them some extra money to cover the difference and fees.

    Your solicitor will collect all this money together in a client account and send the seller the agreed purchase price in one transaction.

    If there is any leftover money (e.g. because there is a final LISA interest payment upon closure) then this would be returned by the solicitor from the contribution you made. Solicitors might ask Skipton for a forecast account closure balance based on a proposed closure date to avoid there being any leftover money to return to you.

    Your mortgage deposit is essentially the proportion of the property you end up owning at the end of the transaction - the property price minus the initial mortgage value.

    If your solicitor has given an exchange deposit (say 5% to 10%) from your LISA or your other savings to the seller in advance then they will obviously pay them less on the day of completion. Obviously the exchange deposit cannot come from the mortgage as you have not yet acquired the property for the bank to secure the lending.

    Alex.
    Last edited by Alexland; 12-02-2018 at 8:00 PM.
    • JamSave
    • By JamSave 12th Feb 18, 7:43 PM
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    JamSave
    I'm after some advice if anyone could help.

    I opened a H2B ISA with Halifax in December 2015 and have paid money in every month. I am now looking at transferring my H2B ISA to a Lifetime ISA with Skipton. From what I understand I can transfer what I had saved up until 5th April 2017 (4499.06). Interest was paid in December but does the interest as of the 5th April also count towards the transfer? Because I have continued the 200 a month in to my H2B ISA does that mean I am also able to add a further 2000 for this years tax contribution in my Lifetime ISA, so long as I no longer pay in to my H2B ISA.

    Any help would be appreciated.
    • Alexland
    • By Alexland 13th Feb 18, 7:54 AM
    • 2,389 Posts
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    Alexland
    I opened a H2B ISA with Halifax in December 2015 and have paid money in every month. I am now looking at transferring my H2B ISA to a Lifetime ISA with Skipton. From what I understand I can transfer what I had saved up until 5th April 2017 (4499.06). Interest was paid in December but does the interest as of the 5th April also count towards the transfer? Because I have continued the 200 a month in to my H2B ISA does that mean I am also able to add a further 2000 for this years tax contribution in my Lifetime ISA, so long as I no longer pay in to my H2B ISA.
    Originally posted by JamSave
    You can transfer the entire HTB ISA balance into the LISA but any contributions you have made since 6th April or interest earned since 6th April will reduce the 4k you can contribute this tax year. If you are still with Halifax then I suggest you ask them what proportion of the December interest payment was earned in this tax year. Also remember they will probably make an additional interest payment on account closure which again would count as this tax year.

    Personally I think Skipton are storing up trouble by not being clear on getting this information from the old provider during the transfer process.

    Alex
    • JamSave
    • By JamSave 16th Feb 18, 6:05 PM
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    JamSave
    Trying to get my head around this. Does that mean if I transfer the balance as of 5th April I could then add upto 4000 more into my LISA? Or because I have continued to contribute to my HTB it will reduce what I can add.

    I'm just trying to work out if I should transfer all of it or if it would be better to transfer upto 5April and continue to gain interest on the remainder left in the H2B.

    Please help...
    • NAD57891
    • By NAD57891 16th Feb 18, 7:39 PM
    • 5 Posts
    • 2 Thanks
    NAD57891
    Trying to get my head around this. Does that mean if I transfer the balance as of 5th April I could then add upto 4000 more into my LISA? Or because I have continued to contribute to my HTB it will reduce what I can add.

    I'm just trying to work out if I should transfer all of it or if it would be better to transfer upto 5April and continue to gain interest on the remainder left in the H2B.

    Please help...
    Originally posted by JamSave
    Pretty much.

    As Alex said:

    You can transfer the entire HTB ISA balance into the LISA but any contributions you have made since 6th April or interest earned since 6th April will reduce the 4k you can contribute this tax year.
    I transferred my Help to Buy ISA and that included this years allowance (let's say 2,000). That means I can only add 2000 into my Lifetime ISA this tax year as that equals 4,000.

    You just have to be wary as apparently any interest earned in this tax year will also count towards the 4000 limit.

    I would check with your provider, some ISA's have to be transferred in full as they don't allow partial transfers out.
    • JamSave
    • By JamSave 16th Feb 18, 7:47 PM
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    JamSave
    Thanks, will check if it has to be transferred in full or not.
    • slow-but-patient-JC
    • By slow-but-patient-JC 18th Feb 18, 11:50 PM
    • 10 Posts
    • 13 Thanks
    slow-but-patient-JC
    What if savings are 'locked' away for 11+ years?
    Hi, lurker here that just can't get her head around whether its too risky to 'lock' 4k savings away in this years cash LISA for over 20 years, that could be earning 3% a year elsewhere (over various accounts / drip feeding to regular savers)?

    Wouldn't 4k growing at a saving rate of 3% have a higher balance after 11 years (or 13 years at 2.5%) than the cash LISA 4k + 25% bonus with interest at 0.75%, but without the withdrawal penalties if i'm estimating correctly?
    I know there isn't any fixed savings rates for that period.

    Maybe I'm miscalculating or over worrying, as no one has a crystal ball. I just wondered if it really is a poor option for long term savings (up until you've exhausted all the decent saving rates).

    I just can't settle on transferring in my pre-Apr 2017 H2B ISA and contribute up to 4k this year, to hopefully access the bonus in a year or so, while running the risk of 'locking' away for 20 years if I don't.

    I'd love to buy a house one day, and use a LISA or H2B ISA for that purpose in a couple of years - but there's also a chance I won't - and the withdrawal penalty on money that is doing little in the short term is very unattractive (and must be great for the provider). Hopefully, someone will offer a new cash LISA with a better rate to transfer to but it doesn't work that way

    Hypothetically too, for long term savers in a cash LISA rather than a pension, eventually (with max cash contributions each year, presuming no other product has come along to partially transfer to), would this not start exceeding the FSCS guarantee (at about 17 years)? I can't imagine ever saving this but wondered why it hadn't come up.

    Thanks in advance - the forum is so helpful.
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