LISA

[GreenLunchBox]

Hi
I've been reading about LISAs and they seem a bit of a no-brainer but I'm posting here to see if there are any pitfalls I've not thought of. It's for my teenage DS who has a good lump sum of money in a stocks and shares ISA. The money has always been earmarked for a future property purchase. Is there anything I am missing that could make a LISA not a good idea?

The drawback is that there's q huge penalty for accessing it for reasons outwith buying a first home, reaching 60 or becoming terminally ill. If you're fine with that I don't see any other problems.

I have one but I can't actually use it to buy a house as the house price is capped. So I guess it now has to sit there 20 years until I can spend it 🤨

@FlyingWhistle

I have one but I can't actually use it to buy a house as the house price is capped. So I guess it now has to sit there 20 years until I can spend it 🤨

Oh gosh. That's a worry. I believe the cap is £450K though, so where on earth do you live?!

There is currently an issue that once age 40, the provider of the LISA cannot be changed.

I don't think you can Transfer money between an ISA and a LISA. So money would need to be taken out of the ISA, then put in to the LISA, so it would use up to £4k of ISA allowance even though it is money from an ISA. Check with LISA providers... never know they may have a way to do without leaving the ISA wrapper.

House price cap. If that stays the same as now, then it will increasing buy a smaller and smaller house if house prices keep increasing.

@Blahdyblahbla

The drawback is that there's q huge penalty for accessing it for reasons outwith buying a first home, reaching 60 or becoming terminally ill. If you're fine with that I don't see any other problems.

Yes, I understand the penalty is 25%. I was thinking that means they'll just take back the bonus they applied, which wouldn't matter if you kept it in cash, but if you invested in stocks which increased in value I guess it means they will take some of your gains. I suppose you still will always end up on top (or am I wrong?) I suppose if your investments lost money then you'd lose.

The penalty is MORE than the bonus.

£4k in, £1k bonus = £5k.

£5k withdrawn, 25% = £1250, so get £3,750

That is before you take in account any growth on the £5k.

I have one with moneybox, I just have it to round up the purchases on my other cards which has added up to over £2k over 2 years. I can't use it to buy a house as I already have one but quite like it to put a bit away for the future.

The downside is you can't access it without the 25% deduction so if you end up unemployed you lose a lot but also can't claim benefits untill you've used the savings (if over the savings limit). If your DS wants to buy a house in the near future then it's a pretty sensible option.

Help to Save is a similar 4 year scheme for people on a low income, you put £50 a way a month then at 2 years get a 50% bonus on what is saved and a further 50% bonus from what is saved in years 3-4.

@nannynick

The penalty is MORE than the bonus.

£4k in, £1k bonus = £5k.

£5k withdrawn, 25% = £1250, so get £3,750

That is before you take in account any growth on the £5k.

Ah!

@HPandTheNeverEndingBedtime

I have one with moneybox, I just have it to round up the purchases on my other cards which has added up to over £2k over 2 years. I can't use it to buy a house as I already have one but quite like it to put a bit away for the future.

The downside is you can't access it without the 25% deduction so if you end up unemployed you lose a lot but also can't claim benefits untill you've used the savings (if over the savings limit). If your DS wants to buy a house in the near future then it's a pretty sensible option.

Help to Save is a similar 4 year scheme for people on a low income, you put £50 a way a month then at 2 years get a 50% bonus on what is saved and a further 50% bonus from what is saved in years 3-4.

Thank you! Didn't know about HTS