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  • FIRST POST
    • kimplus8
    • By kimplus8 4th Aug 18, 11:00 AM
    • 706Posts
    • 2,162Thanks
    kimplus8
    LISA question please.
    • #1
    • 4th Aug 18, 11:00 AM
    LISA question please. 4th Aug 18 at 11:00 AM
    I have got myself into a complete confusion.
    So I have the max 4000 per year to pay into my LISA as roughly 330 per month, however my ISA pays out a much better interest rate.
    I actually have approx 500 per month available for savings.
    Is it better for me to pay the full 500 into my ISA which has better interest, then just before April, transfer 4000 into my LISA and will that still attract the 25% bonus, or do I have to spread out the 4000 equally over 12 months to get the bonus?
    So essentially I'm saying (sorry for waffling) is it better to pay
    500 per month (6000 pa) into my Isa at a rate of 1.25% and then transfer 4000 into the LISA in April or
    Pay 333.00 per month into my LISA at 0.75% and also pay 167 per month into my ISA.
    This may be blindingly obvious and Im just acting really dim but I guess it boils down to if the bonus will still be paid if I transfer in April and are there any rules stopping this.
    Thanks in advance for any replies.
    Last edited by kimplus8; 04-08-2018 at 11:02 AM. Reason: I can't spell or type apparently, sorry
    Dave Ramsey and Martin Lewis are my Money Saving Heros.
Page 1
    • eskbanker
    • By eskbanker 4th Aug 18, 11:12 AM
    • 8,225 Posts
    • 9,238 Thanks
    eskbanker
    • #2
    • 4th Aug 18, 11:12 AM
    • #2
    • 4th Aug 18, 11:12 AM
    Paying the full annual 4K into a LISA right at the end of the tax year makes perfect sense if you get better interest elsewhere before that (not difficult, even after Skipton have reportedly passed on the base rate increase later this month) and many are doing this as it's compliant with all relevant rules and regs, and yes, you'll get the same 25% bonus regardless of when in the tax year you pay the money in.

    Edit: Skipton commitment shown at https://www.skipton.co.uk/base-rate-change
    Lifetime Cash ISA to increase to 1.00% tax-free per annum/AER variable before 17 August
    Last edited by eskbanker; 04-08-2018 at 11:15 AM. Reason: Added Skipton rate increase link
    • bowlhead99
    • By bowlhead99 4th Aug 18, 11:22 AM
    • 8,283 Posts
    • 15,135 Thanks
    bowlhead99
    • #3
    • 4th Aug 18, 11:22 AM
    • #3
    • 4th Aug 18, 11:22 AM
    The LISA maximum limit for the year is set per year rather than per month. So, yes you can pay it in all on one day.

    Therefore, it is better to earn a higher interest rate during the year, as long as you don't forget to transfer it. And don't forget that it will take time for the transfer to complete, as it would be an expensive mistake if you didn't get the money into the LISA by 5 April, so maybe start looking at the transfer options at the beginning of March so that if it takes a couple of weeks you're still OK.

    Having said all that, the difference in interest rates is only half a percent (1.25 vs 0.75). If you are talking about 4k building up over a bit less than a year (from 0 to 4k), then you can say that on average there's only really about 2k in the account for a year. And half a percent a year on 2k is about a tenner.

    Frankly, I wouldn't bother putting money in some other account and having to remember to go through a transfer process to urgently move it into the LISA account at the end to make sure I got the bonus, when my reward for doing it that convoluted way is just a tenner. I would just pay into my LISA through standing order to use up the full allowance; and put the rest elsewhere.


    When looking at the best 'elsewhere', check out non-ISA Regular Saver accounts. At Nationwide their Flexclusive regular saver accounts (for people meeting the terms and conditions of the Flex / Flex Plus / Flex Direct current accounts) pay 5% on contributions of up to 250 a month. Likewise at Santander if you open a 123 current account their Regular eSaver account pays 5% on up to 200 a month (only 3% if you don't have their current account).

    So:
    - yes you can build money in your ISA at 1.25% and move it to LISA at end of year , but it doesn't make much extra profit (especially with forthcoming small interest rate increase from Skipton), so I wouldn't bother.

    - now you know you can definitely pay into the LISA at the end of the year it is worth investigating where to put your money in the meantime, and a regular saver account at 3-5% which offers instant access (like the Nationwide or Santander products) is much better than an ISA at 1.25%, so the added value from doing the 'build it up elsewhere' is more than a tenner and you might like to do that.
    • Alexland
    • By Alexland 4th Aug 18, 11:31 AM
    • 3,383 Posts
    • 2,717 Thanks
    Alexland
    • #4
    • 4th Aug 18, 11:31 AM
    • #4
    • 4th Aug 18, 11:31 AM
    Make sure you allow enough time for any unexpected problems making the contribution as the tax year deadline is immovable. We heard problems with LISA providers being unable to verify identity, rejecting contributions, etc at the end of last tax year. All takes time to sort out and you don't want to miss out on the bonus.

    If transferring an ISA into a LISA (rather than doing a cash withdrawal and deposit which wastes some of the 20k annual allowance if that matters to your circumstances) then I would suggest leaving a couple of months of safety as even cash ISA transfers can be very slow.

    Alex.
    • epm-84
    • By epm-84 4th Aug 18, 11:43 AM
    • 1,400 Posts
    • 4,335 Thanks
    epm-84
    • #5
    • 4th Aug 18, 11:43 AM
    • #5
    • 4th Aug 18, 11:43 AM
    One thing to note is the bonus in to your LISA will be paid monthly and interest will be paid on the bonus as well. So the question to ask is 1% on 625 better than 1.25% on 500? The answer is no. However, saying that the bonus won't be paid immediately so 1.25% on 500 is very slightly better and does give you the advantage of being able to withdraw the money penalty free until the end of the tax year in case anything unexpected happens.
    • kimplus8
    • By kimplus8 4th Aug 18, 1:01 PM
    • 706 Posts
    • 2,162 Thanks
    kimplus8
    • #6
    • 4th Aug 18, 1:01 PM
    • #6
    • 4th Aug 18, 1:01 PM
    Thanks for all of your fantastic replies, I think I'm going pay it all into my ISA so there is no risk of me getting a penalty if something happens and I need the money for whatever reason. This is the first time in my life that I have actually had any savings let alone 4000 potentially. Then around beg of march ill draw it out into my current account which takes 24 hrs and then pay into my Lisa which takes 36 hours. this should leave plenty of time for any mess ups!
    Dave Ramsey and Martin Lewis are my Money Saving Heros.
    • Alexland
    • By Alexland 4th Aug 18, 1:16 PM
    • 3,383 Posts
    • 2,717 Thanks
    Alexland
    • #7
    • 4th Aug 18, 1:16 PM
    • #7
    • 4th Aug 18, 1:16 PM
    If you have opened the LISA account and made a small contribution in advance they should have already done all the identity checks and recognise your bank account.

    Don't make the mistake of one of the recent forum posters who last tax year opened with 1, added 4k and then saw their whole contribution rejected as it was 1 over the annual limit! Make sure you login to see the contribution land as it might take a while to notify you it has been rejected.

    Alex
    Last edited by Alexland; 04-08-2018 at 1:20 PM.
    • SallyG
    • By SallyG 5th Aug 18, 2:28 PM
    • 844 Posts
    • 194 Thanks
    SallyG
    • #8
    • 5th Aug 18, 2:28 PM
    Natwest Help to Buy ISA
    • #8
    • 5th Aug 18, 2:28 PM
    Offspring looking at Natwest Help to Buy ISA
    Earn 2% AER / 1.98% tax-free interest on your savings

    Is this a good interest rate for a Help to Buy ISA?

    Is this Help to Buy ISA the same as a Lifetime ISA - ie for a first time house buy [250k max outside London] OR as extra retirement cash?
    Must be under age 40 to join - is there a statutory age limit to paying in?
    • eskbanker
    • By eskbanker 5th Aug 18, 3:08 PM
    • 8,225 Posts
    • 9,238 Thanks
    eskbanker
    • #9
    • 5th Aug 18, 3:08 PM
    • #9
    • 5th Aug 18, 3:08 PM
    Offspring looking at Natwest Help to Buy ISA
    Earn 2% AER / 1.98% tax-free interest on your savings

    Is this a good interest rate for a Help to Buy ISA?

    Is this Help to Buy ISA the same as a Lifetime ISA - ie for a first time house buy [250k max outside London] OR as extra retirement cash?
    Must be under age 40 to join - is there a statutory age limit to paying in?
    Originally posted by SallyG
    Help To Buy ISA and Lifetime ISA are two different schemes - the relevant explanatory articles answer your questions, and many others, at:
    https://www.moneysavingexpert.com/savings/help-to-buy-ISA/
    https://www.moneysavingexpert.com/savings/lifetime-ISAs/
    • ValiantSon
    • By ValiantSon 5th Aug 18, 4:53 PM
    • 2,536 Posts
    • 2,516 Thanks
    ValiantSon
    Thanks for all of your fantastic replies, I think I'm going pay it all into my ISA so there is no risk of me getting a penalty if something happens and I need the money for whatever reason. This is the first time in my life that I have actually had any savings let alone 4000 potentially. Then around beg of march ill draw it out into my current account which takes 24 hrs and then pay into my Lisa which takes 36 hours. this should leave plenty of time for any mess ups!
    Originally posted by kimplus8
    It sounds like you don't have substantial savings elsewhere, so you aren't going to end up paying any tax on the interest that you earn. It therefore doesn't make any sense to use an ISA for the monthly deposits during the course of the year. You will earn more interest by using a non-ISA account (as bowlhead99 was suggesting). Even in an easy access savings account, you can earn more than the 1.25% your ISA is paying (current best is 1.4%). If you use interest paying current accounts, or regular savers, then you can earn even more - up to 5%. Why would you use an ISA in this situation?

    N.B. Most regular savers lock your money away for a year, but Santander (5%) and Nationwide (5%) allow you to withdraw the money before, without penalty. Although nowhere near as good a rate, Leeds Building Society (2.3%) also allow you to withdraw money from their regular saver, without penalty.
    • ValiantSon
    • By ValiantSon 5th Aug 18, 4:59 PM
    • 2,536 Posts
    • 2,516 Thanks
    ValiantSon
    Offspring looking at Natwest Help to Buy ISA
    Earn 2% AER / 1.98% tax-free interest on your savings

    Is this a good interest rate for a Help to Buy ISA?

    Is this Help to Buy ISA the same as a Lifetime ISA - ie for a first time house buy [250k max outside London] OR as extra retirement cash?
    Must be under age 40 to join - is there a statutory age limit to paying in?
    Originally posted by SallyG
    As eskbanker said, they are different products, and you should have a look at the links provided to explain the differences.

    What I would say, however, is that the NatWest rate of 2% is easily beaten. Barclays are currently offering 2.53%, and depending on where you live you could potentially get a higher rate through a local building society. The list of these is at the bottom of the MSE article linked to by eskbanker.
    • Vet
    • By Vet 6th Aug 18, 8:58 AM
    • 56 Posts
    • 34 Thanks
    Vet
    Just do it at the end of the year i.e. transfer 4k in March to get the full 25% bonus in April Good luck!
    • kimplus8
    • By kimplus8 8th Aug 18, 8:56 PM
    • 706 Posts
    • 2,162 Thanks
    kimplus8
    It sounds like you don't have substantial savings elsewhere, so you aren't going to end up paying any tax on the interest that you earn. It therefore doesn't make any sense to use an ISA for the monthly deposits during the course of the year. You will earn more interest by using a non-ISA account (as bowlhead99 was suggesting). Even in an easy access savings account, you can earn more than the 1.25% your ISA is paying (current best is 1.4%). If you use interest paying current accounts, or regular savers, then you can earn even more - up to 5%. Why would you use an ISA in this situation?

    N.B. Most regular savers lock your money away for a year, but Santander (5%) and Nationwide (5%) allow you to withdraw the money before, without penalty. Although nowhere near as good a rate, Leeds Building Society (2.3%) also allow you to withdraw money from their regular saver, without penalty.
    Originally posted by ValiantSon
    The short answer is , I don't know. Ive not had savings before and find it all terribly confusing. TBH it all just overwhelms me. I just got the isa because my mum said they are the best. I honestly don't know what I'm doing which is why I asked the Lisa/Isa question in the first place.
    Dave Ramsey and Martin Lewis are my Money Saving Heros.
    • ValiantSon
    • By ValiantSon 9th Aug 18, 4:34 AM
    • 2,536 Posts
    • 2,516 Thanks
    ValiantSon
    The short answer is , I don't know. Ive not had savings before and find it all terribly confusing. TBH it all just overwhelms me. I just got the isa because my mum said they are the best. I honestly don't know what I'm doing which is why I asked the Lisa/Isa question in the first place.
    Originally posted by kimplus8
    No, ISAs are not uniformly the best option. In your circumstances you can earn more interest, without tax worries, in non-ISA accounts.
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