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The benefits of a LISA


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I learnt something recently which I wanted to bring to the attention of the forum.

Lifetime ISAs... introduced in 2017 as a specific type of ISA. They were designed to help FTBs as, similar to a SIPP you get a 25% tax uplift upon contributions, so long as you either use it as a deposit on a first home OR you use it to fund retirement, which you can access at 60.  These kinda slipped under the radar and not much of a fuss was made about them.

More here: https://www.moneysavingexpert.com/savings/lifetime-isas/

 

However, I believe they offer significant advantages and combine the best of both an ISA and a Pension/SIPP and can be used to compliment them.

Firstly, the 25% uplift of these products to FTBs makes them an automatic no-brainer. If you are yet to buy a first home in the UK then you should open and save the deposit within a LISA wrapper, no if and buts.

But even if you're not a FTB then the LISA has considerable benefits. 

The decision to make when choosing your investment wrapper was always between mainly between tax relief on the way in (Pension) vs Tax relief on the way out (ISA) with a few caveats.

More here: https://monevator.com/pensions-versus-isas/

 

 

Guess what? A LISA offers the best of both worlds - tax relief both on the way in AND on the way out! It is the only wrapper type to do so. ie, it is complete end to end tax shield.

The limitations of a LISA are 

  • they are only available to start for people between 18-39yo (you can carry on contributing past 40yo, but not open a new one)
  • you can only put in £4000/year (with £1k uplift)
  • You have to keep the tax relief you must either use it for a house deposit OR wait until you are 60 to access the money for retirement


If are of a qualifying age, then for retirement purposes, I feel that filling out your LISA threshold each year should be a priority. Remember, it's tax free on both contributions and withdrawals. This is not true of Pensions/SIPPs, ISA or any other product. The LISA can then be grown alongside your regular Pension/SIPP and then you can draw upon both of them alongside each other in retirement. This will hopefully also lower the income tax you pay on your SIPP/Pension income stream... even perhaps eliminating it altogether.

 

 

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10 minutes ago, vand said:

hey are only available to start for people between 18-39y

SHOOT - need to travel back in time quite some way! 😕

Now where is my time machine (damn Alzheimer) 😁

Seriously tho - your quite right @vand some serious potential to gain from HMRC tax breaks - but these rules can change at the swipe of a pen - - so grab while you can  - if able!

 

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1 minute ago, 5huggy said:

SHOOT - need to travel back in time quite some way! 😕

Now where is my time machine (damn Alzheimer) 😁

Seriously tho - your quite right @vand some serious potential to gain from HMRC tax breaks - but these rules can change at the swipe of a pen - - so grab while you can  - if able!

 

 

Yeah, I'm the same.. absolutely gutting I'm missing out by a couple of years. Bloody Millennials get all the tax breaks.

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1 minute ago, vand said:

 

Yeah, I'm the same.. absolutely gutting I'm missing out by a couple of years. Bloody Millennials get all the tax breaks.

But they are FUBAR'd by poor wage growth and "hidden inflation" - that has gotta go skyward at some point to "cover" Government debt - - and probably wont get any "reasonable" kind of State pention!

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They are entitled to them

Technically, alcohol is a solution..

'It [socialism] poses a growing threat, however unintentional, to the freedom of this country, for there is no freedom where the State totally controls the economy. Personal freedom and economic freedom are indivisible. You can’t have one without the other. You can’t lose one without losing the other.'

"There is no such thing as public money, there is only taxpayers' money"

Let not England forget her precedence of teaching nations how to live.

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Did the previous generation from mine steal from me?

Technically, alcohol is a solution..

'It [socialism] poses a growing threat, however unintentional, to the freedom of this country, for there is no freedom where the State totally controls the economy. Personal freedom and economic freedom are indivisible. You can’t have one without the other. You can’t lose one without losing the other.'

"There is no such thing as public money, there is only taxpayers' money"

Let not England forget her precedence of teaching nations how to live.

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5 minutes ago, Roy said:

Did the previous generation from mine steal from me?

Not "generation" per sae  - but government entities - through unfunded promises and debts that have over the years snowballed to where we are today - and the most forgotten method of government theft - "INFLATION"

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That's true but isn't one generation funding the next generation's pensions?

Technically, alcohol is a solution..

'It [socialism] poses a growing threat, however unintentional, to the freedom of this country, for there is no freedom where the State totally controls the economy. Personal freedom and economic freedom are indivisible. You can’t have one without the other. You can’t lose one without losing the other.'

"There is no such thing as public money, there is only taxpayers' money"

Let not England forget her precedence of teaching nations how to live.

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Yes they are in taxes, that's how saving works as well. You need the next generation to buy your gold from you, your house, work to pay the rent on your investment property, buy the products associated with your SIPP shares. As long as everyone understands that at different parts of their life they will be a saver and later in life a net spender (also the first 18 years of life at least) then it works so long as the population can sustain it. Otherwise - deficit spending, look at the debt and triple lock.

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Be careful with the LISA if you ever need help from the state in terms of out of work benefits the LISA is not treated as a pension but as savings. The government will force you to liquidate, claw back the 25% and charge you for the privilege (you get back less than you paid in) and draw it down until you are eligible for the bennies.

It's genius really. Get people saving for the rainy day, covers both pension, reduces bennies for those who actually need it and haven't made a lifestyle out of claiming, and I reckon it will be means tested later, reducing state pension output. But I'm a pessimist.

It's a good deal if it all goes to plan in life.

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On ‎09‎/‎08‎/‎2019 at 10:08, vand said:

I learnt something recently which I wanted to bring to the attention of the forum.

Lifetime ISAs... introduced in 2017 as a specific type of ISA. They were designed to help FTBs as, similar to a SIPP you get a 25% tax uplift upon contributions, so long as you either use it as a deposit on a first home OR you use it to fund retirement, which you can access at 60.  These kinda slipped under the radar and not much of a fuss was made about them.

More here: https://www.moneysavingexpert.com/savings/lifetime-isas/

 

However, I believe they offer significant advantages and combine the best of both an ISA and a Pension/SIPP and can be used to compliment them.

Firstly, the 25% uplift of these products to FTBs makes them an automatic no-brainer. If you are yet to buy a first home in the UK then you should open and save the deposit within a LISA wrapper, no if and buts.

But even if you're not a FTB then the LISA has considerable benefits. 

The decision to make when choosing your investment wrapper was always between mainly between tax relief on the way in (Pension) vs Tax relief on the way out (ISA) with a few caveats.

More here: https://monevator.com/pensions-versus-isas/

 

 

Guess what? A LISA offers the best of both worlds - tax relief both on the way in AND on the way out! It is the only wrapper type to do so. ie, it is complete end to end tax shield.

The limitations of a LISA are 

  • they are only available to start for people between 18-39yo (you can carry on contributing past 40yo, but not open a new one)
  • you can only put in £3000/year (with £1k uplift)
  • You have to keep the tax relief you must either use it for a house deposit OR wait until you are 60 to access the money for retirement


If are of a qualifying age, then for retirement purposes, I feel that filling out your LISA threshold each year should be a priority. Remember, it's tax free on both contributions and withdrawals. This is not true of Pensions/SIPPs, ISA or any other product. The LISA can then be grown alongside your regular Pension/SIPP and then you can draw upon both of them alongside each other in retirement. This will hopefully also lower the income tax you pay on your SIPP/Pension income stream... even perhaps eliminating it altogether.

 

 

They are pretty good, but just be careful you don't need the money as 25% fee will be taken upon withdrawal, so you'll actually lose money. I think also the threshold is £4000, not £3000 (even better!). Options of cash and stocks are available as well depending on your risk tolerance. If, like me, your planning in buying in 3-4 years time probably best to stick with cash but ultimately its that persons decision whichever they choose.

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3 hours ago, nee4891 said:

They are pretty good, but just be careful you don't need the money as 25% fee will be taken upon withdrawal, so you'll actually lose money. I think also the threshold is £4000, not £3000 (even better!). Options of cash and stocks are available as well depending on your risk tolerance. If, like me, your planning in buying in 3-4 years time probably best to stick with cash but ultimately its that persons decision whichever they choose.

Correct. To keep the 25% top up the LISA needs to be used for a house deposit AND/OR held until you are 60. If you need to access any of the money before you are 60 for purposes other than as a hosue deposit then you will lose the top-up bonus on that amount you liquidate.

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4 hours ago, nee4891 said:

They are pretty good, but just be careful you don't need the money as 25% fee will be taken upon withdrawal, so you'll actually lose money. I think also the threshold is £4000, not £3000 (even better!). Options of cash and stocks are available as well depending on your risk tolerance. If, like me, your planning in buying in 3-4 years time probably best to stick with cash but ultimately its that persons decision whichever they choose.

If you're gonna buy in 3yrs it's still worth it I think, that's 3000 free if you max it out for the 3yrs. 

Free money is the best money. 

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19 hours ago, Notafront4adragon said:

If you're gonna buy in 3yrs it's still worth it I think, that's 3000 free if you max it out for the 3yrs. 

Free money is the best money. 

Agreed I think he means open one and stay in cash for the 3 years as the safe option. I did this with help to buy isa's, opened two one for me one for the wife and maxed out the cash savings using that. Then put other savings into other assets outside of the htb isa (now the Lisa) in gold and stocks. At least I don't know if you can open help to buy isa anymore, I assume the lisa has replaced it?

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2 hours ago, KDave said:

Agreed I think he means open one and stay in cash for the 3 years as the safe option. I did this with help to buy isa's, opened two one for me one for the wife and maxed out the cash savings using that. Then put other savings into other assets outside of the htb isa (now the Lisa) in gold and stocks. At least I don't know if you can open help to buy isa anymore, I assume the lisa has replaced it?

Htb isas are still available to open till the end of November this year. I'm a few months away from maxing mine out :)

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1 hour ago, Bullionaire said:

Htb isas are still available to open till the end of November this year. I'm a few months away from maxing mine out :)

Good work. We only had ours for just over a year, the govt. handout/bonus paid the solicitors fees and a little bit of the stamp duty. You won't need to worry about stamp duty now though unless buying a big un. 

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I was thinking about LISA at some point but it is very bad in long term. It is only 25% per year might look impressive for one year return but in 3 years most of share save plans offered by employers beat that. The point about status of savings is very good as well that can be crucial in some life situations. Remember about inflation in long term as well. And as a deposit it is not best option as well coz as fare as i remember ( i might be wrong ) you can use only money from LISA as a deposit, it cant be joint with ie cash saved and put together as a deposit.

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It would buy you a new tracksuit and a pair of pumps every year 😁

Technically, alcohol is a solution..

'It [socialism] poses a growing threat, however unintentional, to the freedom of this country, for there is no freedom where the State totally controls the economy. Personal freedom and economic freedom are indivisible. You can’t have one without the other. You can’t lose one without losing the other.'

"There is no such thing as public money, there is only taxpayers' money"

Let not England forget her precedence of teaching nations how to live.

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49 minutes ago, MrGeorge said:

Why the hell would you want to invest in anything that’s limited to 3k per year for retirement. People are trying to retire rich 3k a year wont get you 💩 

I think your missing the point here- it’s aimed at young people- and those on a low income-  a method of helping them get on the housing ladder or save a few quid for their pension- yes, restricted to £3k per year in terms of the bonus 25%- but I guess this can be a product you hold alongside other investments. 

My 21 year old has one of these- he’s at University still and works alongside his studies I know he lumped in his savings and some stocks he owned into this when he signed up but, I guess he doesn’t even invest up to the maximum £3k per year now, for the simple reason, he is on a low income- but at least once his income improves he can max it out- and has the opportunity later when buying his first home, to get a leg up.

I do know some people have been critical of this opportunity for youngsters but I think the kids who want to get on and do the right thing, stand on their own two feet work hard and buy their own home should be supported in some way- those youngsters who choose or who haven’t been parented to even get a job will get far, far more financial support from the Govt.  in the coming years, and likely over most of their lives (housing benefit, universal credit etc. etc.) than the cohort who get ‘free’ money through a LISA. 

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32 minutes ago, richatthecroft said:

I think your missing the point here- it’s aimed at young people- and those on a low income-  a method of helping them get on the housing ladder or save a few quid for their pension- yes, restricted to £3k per year in terms of the bonus 25%- but I guess this can be a product you hold alongside other investments. 

My 21 year old has one of these- he’s at University still and works alongside his studies I know he lumped in his savings and some stocks he owned into this when he signed up but, I guess he doesn’t even invest up to the maximum £3k per year now, for the simple reason, he is on a low income- but at least once his income improves he can max it out- and has the opportunity later when buying his first home, to get a leg up.

I do know some people have been critical of this opportunity for youngsters but I think the kids who want to get on and do the right thing, stand on their own two feet work hard and buy their own home should be supported in some way- those youngsters who choose or who haven’t been parented to even get a job will get far, far more financial support from the Govt.  in the coming years, and likely over most of their lives (housing benefit, universal credit etc. etc.) than the cohort who get ‘free’ money through a LISA. 

Not only that. Wages have fallen behind house prices by 333% so it's no surprise, that someone in the age bracket of 18-39, struggles with buying. I'll see if I can find the link to where it says this, it was an interesting read.

 

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Technically, alcohol is a solution..

'It [socialism] poses a growing threat, however unintentional, to the freedom of this country, for there is no freedom where the State totally controls the economy. Personal freedom and economic freedom are indivisible. You can’t have one without the other. You can’t lose one without losing the other.'

"There is no such thing as public money, there is only taxpayers' money"

Let not England forget her precedence of teaching nations how to live.

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32 minutes ago, MrGeorge said:

my kids wont be buying the bank a free house. They will be told to just rent and stick all there money into stocks.

And buy their landlord a free house 

Technically, alcohol is a solution..

'It [socialism] poses a growing threat, however unintentional, to the freedom of this country, for there is no freedom where the State totally controls the economy. Personal freedom and economic freedom are indivisible. You can’t have one without the other. You can’t lose one without losing the other.'

"There is no such thing as public money, there is only taxpayers' money"

Let not England forget her precedence of teaching nations how to live.

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