Lifetime ISA

[avinalarf]

My daughter is thinking about taking out a Lifetime ISA.
Have you any advice about the pros and cons.
I've read through the terms and just would like other opinions please.

[nealeh1875]

i have the HTB LISA, it's better than the HTB ISA as you can save £4k per annum instead of £2400.00. I use the HTB ISA as a cash ISA pretty much.

I think the only ''downside'' of the HTB LISA or Pension LISA is the penalty charge if you withdraw it for not the intended purpose, i.e. not buying a house

SO just make sure if she does go for a LISA she doesn't take money out as she will get penalized

[95JO]

No downsides unless you need to withdraw the cash early or want to buy a house over £450k.

I've had a S&S LISA for almost a year, managed to max the £4k contribution in March 17/18 tax year and have since max'd it monthly (£333pm) up until now, plan to continue for a few more years. Decent gains from the funds I've invested in too (much more than I would've got from Cash LISA interest) but that's largely irrelevant...

Tell her to "JUST DO ITTTT" *Shia LaBeouf voice*

[JulianPH]

Hello mate, long time no speak!

The Lifetime ISA (as has been pointed out) has a £4k personal allowance limit and the Government will add £1 for every 4 pounds you daughter invests (bringing the total combined annual maximum to £5k).

However, the exit penalty is an important consideration if she may want to use the funds for anything other than her first house purchase or retirement.

The Treasury has either been quite devious or financial incompetent in giving the 25% uplift and 25% penalty for withdrawals for any other purpose.

A 25% uplift on a £4K investment is £1k, but a 25% exit penalty on the withdrawal of this £5k is £1,250.

This means she will be effectively losing 6.66% of her personal contribution, not just a return of the government's contribution.

This also applies on any growth, so £4k + £1k doubles to £10k and the exit penalty is £2,500 leaving her with £7,500.

The same £4k invested in a normal ISA that doubled to £8k would enable an £8k withdrawal, leaving her better of.

Of course if she never withdraws except for one of the two reasons the Lifetime ISA is designed for then she would always ber better off using this option (assuming all other things were equal).

Cheers

[avinalarf]

My thanks to you all for your comments.

[Jimmy Recard]

nealeh1875 said:

i have the HTB LISA, it's better than the HTB ISA as you can save £4k per annum instead of £2400.00. I use the HTB ISA as a cash ISA pretty much.

I think the only ''downside'' of the HTB LISA or Pension LISA is the penalty charge if you withdraw it for not the intended purpose, i.e. not buying a house

SO just make sure if she does go for a LISA she doesn't take money out as she will get penalized

Pretty much this. If she can only put aside £2400 a year or less and hasn't owned a home, she might be better off with the HtB ISA as they tend to have much better interest rates (2.5% with Virgin Money off the top of my head)

There are also no withdrawal penalties on the HtB ISA

[IntriguedUser]

The LISA has to be used towards a deposit for a mortgage. If you save 100k you cannot use it to buy outright.