Lifetime ISA

[familyissues12345]

Hi everyone

20 year old DS has asked my opinion on lifetime ISA's so I thought maybe I could pick your brains please!

He's currently second year Uni. Two more years to go. Pretty money savvy - in other words, loves to save, plans for the future etc.

He still has his 16k child trust fund money. It's currently in a very basic savings account (I'm unsure about interest).

He's now looking to the future - plans to move out after Uni etc. He hopes that this time in 3 years he'll be certainly looking. May not be particularly realistic, but he's keen to avoid renting and get himself on the property ladder. He's hoping to still be with his girlfriend and they'll move in together.

So here are the questions -

Just before the Help to Buy ISA's were stopped, he opened one but didn't put anything in it. He could use that account, but is limited to how much he's allowed to put in (and the gov contribution is lower)

He's now considering opening a Lifetime ISA - he can put in 4k a year (can he squeeze in 4k before April if he's quick?) and the government contribution is more.

He's done his research and keen on the Lifetime ISA option, but is asking me (who's not great with this sort of thing!) for my opinion

I'd appreciate any help! Thanks

LISAs are good if you're definitely going to buy a property under the limit. But if there's any uncertainty, I wouldn't use one because otherwise you can't get the money out penalty free until you hit 60.

I have one but only because I'd like a little nest egg in 30yrs time (already own a house with mortgage). Many would say invest in a pension over a LISA as well if the payout at 60 is your goal.

Help to Buy ISAs are more flexible. You can withdraw the money if you don't end up using it for a house so better if uncertainty.

Martin Lewis/MSE has some good info on both.

Agree with the PP, me and DH both have the lifetime ISA and max them out as a top up towards retirement in 20 years. If he's definitely going to buy a property under the threshold then the 25% government top up can't be beaten really. Or if he's unsure but happy to forfeit this and leave it till he's 60 then again worth it. We use moneybox which I have found easy to use. I certainly think opening one is a good idea if you meet the criteria even for potential future contributions. I keep expecting the government to pull it in all honestly.

Big penalty if you don't use for a house deposit

£4,000 + £1,000 (25% bonus) = £5,000

£5,000 withdrawn not for house purchase - 25% penalty = £3,750.

But if he is confident it will be used for a house purchase it is a good return. ds(20) has one.

We have them for our children, the 25% top up is so good and the interest is good too.
we put in £4k a year as the maximum top up is £1k a year, so your ds could spread it out.

If he's planning to buy a house or is happy to wait until 60 to access the money it's a no-brainer to transfer £4k before the deadline and another £4k immediately afterwards. That's £2k for doing nothing!

DH and I both had them in the run up to buying our house. We ended up with £8k of “free” money which was brilliant. I really rate the Moneybox app for how smooth the withdrawal process was.

Following as I am also dithering.

want to set up an account for 18 year old DD. Torn between a LISA as chances are she will
need a property/pension at some point, but then am also thinking would an ISA be better in case she needs the money for something else?

I used a Lisa to buy. Between DP and I we made £5k which was the equivalent of our legal fees and stamp duty. However, to echo others:-

1.There is a limit on the property price you can use it on (this could be an issue if a high earner/inheritance see point 3)

2.It counts as savings for benefits so if he needed to claim benefits he might need to access the cash (I assume the penalty still applies but you may want to check). This is important when considering Lisa v pension.

3.This is fact specific but DP and I didn't use £1k each of our Lisa money. This money is now in a Lisa with a rubbish interest rate but we'll take a hit if we move it elsewhere into a non-Lisa account. There aren't many Lisa providers so the rates aren't very competitive.

My daughters have/had one. First one has already used it for buying a house.

My only word of warning would be to check in advance with the solicitor you use for conveyancing how much they will charge to process the paperwork as part of the process of buying the property.

My daughter's charged £400, which we thought was a complete rip-off.

I have mine with MoneyBox, I also have their highish interest instant access saver with them. I have round ups set up on all my other bank accounts into the instant access one which adds up really quickly over a year but you don't notice it, I can utilise that during the year if I want and then transfer the £4000 or as much as I have over to the LISA before the end of the tax year.

You can transfer the lump some wherever he could put in £4k now and another £4k when the new tax year starts locking up half of his trust fund.

I am happy to have it as a little nest egg for when I turn 60.
If he doesn't use it to buy a house and uses it for when he is older should he ever need benefits he'll have to run it down first and loses the bones and interest other than that there are no real negatives.

Great, thanks everyone!

My son has a LISA and yes your son can put in 4k before April and it will count the government will top it up by another 1k to 5k.