Jump to content
House Price Crash Forum
Si1

Lifetime ISA to die?

Recommended Posts

First, cross party MP committee heavily criticises it for perverse incentives.

Now, Hargreaves Lansdowne refusing to take LISA transfers from other providers.

(Telegraph online story today)

Share this post


Link to post
Share on other sites

Another half-baked Cameron/Osborne policy to sort-of-help-the-under-40s-but-not-really, just like Starter Homes.

Share this post


Link to post
Share on other sites

Wonderful. Other than the potential to further-bolster house prices (although clearly to nowhere near the same extent as HTB and all the other props) what am I missing? 

I took out one of these recently in the hope that by the time the correction has hit the Mrs and I will have a few more grand to chuck at a something we might actually be able to afford!

Tbh I see this is pretty much the least-offensive and most legitimate "aid" to FTBs.. 

Share this post


Link to post
Share on other sites
23 minutes ago, Dorkins said:

Another half-baked Cameron/Osborne policy to sort-of-help-the-under-40s-but-not-really, just like Starter Homes.

I would agree it was a foolish idea that would just foster more division and I hope it disappears.  However we can't blame the concept of 'starter homes' on Cameron; the wretched things have been around since at least the early 80's.

Share this post


Link to post
Share on other sites

Its a very odd product - a pensions vehicle (unless you want to use it to buy your first home when you can withdraw the money before 60) which is only open to under 40s.

Perhaps the government should be most concerned about over 40s who rent - as someone is going to have to pick up the tab for their rent in their rapidly approaching retirement.

Share this post


Link to post
Share on other sites
35 minutes ago, MARTINX9 said:

Its a very odd product - a pensions vehicle (unless you want to use it to buy your first home when you can withdraw the money before 60) which is only open to under 40s.

Perhaps the government should be most concerned about over 40s who rent - as someone is going to have to pick up the tab for their rent in their rapidly approaching retirement.

It conflates leveraged house purchase with long term pension planning. A very dangerous mix in my opinion, a serious missselling issue that could lead those that use this product to be very much poorer. The problem is either, that Cameron/Osborne actually believe their own rubbish, or they just don't care.

Share this post


Link to post
Share on other sites
1 hour ago, Si1 said:

It conflates leveraged house purchase with long term pension planning. A very dangerous mix in my opinion, a serious missselling issue that could lead those that use this product to be very much poorer. The problem is either, that Cameron/Osborne actually believe their own rubbish, or they just don't care.

Other than a potentially minimal knock-on for maintaining HPI I see little issue with it as a shortish-term savings product for a house purchase. It seems seriously questionable as a retirement-funding tool though; especially given the possibility of a future government to do a U-turn 10 minutes from maturity and wipe out tens of thousands of "earned" savings. 

Share this post


Link to post
Share on other sites
18 hours ago, Si1 said:

It conflates leveraged house purchase with long term pension planning. A very dangerous mix in my opinion, a serious missselling issue that could lead those that use this product to be very much poorer. The problem is either, that Cameron/Osborne actually believe their own rubbish, or they just don't care.

The idea is that a lot of people are put off saving for retirement by the more pressing desire to save for a house - so they don't put enough money in pensions.

By having a savings vehicle that can be used either for a pension OR for a house that should in theory make people more relaxed about putting money in for retirement, as if they end up needing it to buy a house they can still withdraw it for that too.

I'm not quite sure it will end up working very well - like all savings products I suspect the rich and the diligent will max out on it whilst the poor and the feckless will continue to be unable/unwilling to.

However, I'm not sure where the "mis-selling" issue arises?

Share this post


Link to post
Share on other sites
3 hours ago, scottbeard said:

 

However, I'm not sure where the "mis-selling" issue arises?

My thought was that it implies govt are backing houses as an equivalent long term financial planning vehicle as pensions, which they aren't and which the govt can't afford to support in the long run.

Share this post


Link to post
Share on other sites
21 hours ago, ftb_fml said:

especially given the possibility of a future government to do a U-turn 10 minutes from maturity and wipe out tens of thousands of "earned" savings

You get the bonus each year. So invest £4k and you see the extra £1k in your account a couple of weeks into the new tax year. 

Share this post


Link to post
Share on other sites

LISA may have a possibly unintended secondary effect.  In a stable or falling house price environment, the FTB would gain by delaying the purchase and topping up LISA to get "free" bonus. 

If FTBs stay out of the markets, prices fall further, therefore delaying the purchase becomes more profitable and HPC accelerates.

 

Share this post


Link to post
Share on other sites
53 minutes ago, UnconventionalWisdom said:

You get the bonus each year. So invest £4k and you see the extra £1k in your account a couple of weeks into the new tax year. 

Thanks - my concern is really that if the banks are able to retain 25% of the balance in the event of a withdrawal that's not for a house purchase or retirement, presumably they'd also have the ability (if instructed by the government) to refuse to pay out the full sum and only return the capital and the pittance paid in interest. 

Such behaviour would seem pretty tame in comparison to a full-scale bail-in, for example. 

For someone fairly young opening one, 40-50yrs is a long time for the goalposts to be moved!

45 minutes ago, Bear Hug said:

LISA may have a possibly unintended secondary effect.  In a stable or falling house price environment, the FTB would gain by delaying the purchase and topping up LISA to get "free" bonus. 

If FTBs stay out of the markets, prices fall further, therefore delaying the purchase becomes more profitable and HPC accelerates.

 

Nice idea; although I can't see a lot of people staving off a purchase for the ability to save another grand (each) a year.. especially if they're paying 8-12 times that in rent during that period. 

Potentially a tidy little incentive for those of us sitting it out in anticipation of a crash though :)

 

Edited by ftb_fml

Share this post


Link to post
Share on other sites
21 hours ago, ftb_fml said:

Other than a potentially minimal knock-on for maintaining HPI I see little issue with it as a shortish-term savings product for a house purchase. It seems seriously questionable as a retirement-funding tool though; especially given the possibility of a future government to do a U-turn 10 minutes from maturity and wipe out tens of thousands of "earned" savings. 

Under certain circumstances, I don't see much wrong with a Stocks and Shares LISA for retirement saving, but maybe I am missing something?

For example, each year until you are 50, invest £5,000 in large, long-established global equity investment trusts (e.g. BNKR, WTAN, ATST, FRCL, etc ...) at a cost of £4,000. Over twenty or thirty years this should grow into a substantial pot.

Then leave the LISA to grow for a further ten years until you are 60, at which time the tax free assets are all accessible to do with as you wish.

The stockbroker custody charges for a S&S LISA are a fraction of the equivalent SIPP charges, plus you can't run foul of pension contribution caps.

For a 20% taxpayer under 50 saving £5,000 p.a. LISA vs SIPP seems to be a close call. For a higher rate taxpayer making larger contributions the SIPP becomes more attractive, plus you can carry on contributing to a SIPP until you are 75. You can of course have both a LISA and a SIPP.

SIPPs are generally not subject to IHT, whereas LISAs are.

IMO the most likely government change to LISA regulations might be to give access to the assets at an age earlier than 60 - to get money circulating into a moribund economy. No downside to that.

Share this post


Link to post
Share on other sites
18 minutes ago, ftb_fml said:

Thanks - my concern is really that if the banks are able to retain 25% of the balance in the event of a withdrawal that's not for a house purchase or retirement, presumably they'd also have the ability (if instructed by the government) to refuse to pay out the full sum and only return the capital and the pittance paid in interest. 

Such behaviour would seem pretty tame in comparison to a full-scale bail-in, for example. 

For someone fairly young opening one, 40-50yrs is a long time for the goalposts to be moved!

Nice idea; although I can't see a lot of people staving off a purchase for the ability to save another grand (each) a year.. especially if they're paying 8-12 times that in rent during that period. 

Potentially a tidy little incentive for those of us sitting it out in anticipation of a crash though :)

 

Like most on here, I'm also worried they could screw us over (further) with amything. They do have that ability as you are able to with draw the money out and pay a 25% penalty upon withdrawal if done before retirement/House purchase. But that would bad and I think anyone who had an account would go mad. I would recommend a stocks and shares one as the interest rates are crap from Skipton (the only cash provider as far as I'm aware). 

Edited by UnconventionalWisdom

Share this post


Link to post
Share on other sites
17 hours ago, ftb_fml said:

Thanks - my concern is really that if the banks are able to retain 25% of the balance in the event of a withdrawal that's not for a house purchase or retirement, presumably they'd also have the ability (if instructed by the government) to refuse to pay out the full sum and only return the capital and the pittance paid in interest. 

In theory yes, because in theory the government could pass laws to confiscate just about anything. In practice I think part of the point of the bonus being paid year by year is that - unlike, say, the tax-free lump sum from pensions (which is all paid at retirement) - with LISAs they've paid you the benefit "up front" which makes it optically much harder to take away.

What seems EXTREMELY unlikely to me in all but apocalyptic scenarios is the idea of them confiscating the lot.  Therefore it feels like you can invest in a stocks & shares LISA and it's basically just like investing in stocks & shares yourself except you'll (probably) get a nice 25% top-up on it.

Share this post


Link to post
Share on other sites
4 hours ago, scottbeard said:

In theory yes, because in theory the government could pass laws to confiscate just about anything. In practice I think part of the point of the bonus being paid year by year is that - unlike, say, the tax-free lump sum from pensions (which is all paid at retirement) - with LISAs they've paid you the benefit "up front" which makes it optically much harder to take away.

 

Yes, i agree - govt much more likely to make it better than worse.  Also remember that in the stocks and shares version the whole lot, including bonus, could have been lost investing in some dodgy, leveraged ETF, so what happens then?

Was going to add to my yearly LISA allowance just before the end of tax year, but thinking now that if the govt scraps it they are likely to say any contribution made before [date of announcement] will still get the bonus and can withdraw anytime. So might be worth a punt for some free money. 

Share this post


Link to post
Share on other sites
23 hours ago, PropertyMania said:

Was going to add to my yearly LISA allowance just before the end of tax year, but thinking now that if the govt scraps it they are likely to say any contribution made before [date of announcement] will still get the bonus and can withdraw anytime. So might be worth a punt for some free money. 

I'd be very surprised if they scrapped it half way through a tax year, since that has so much awkward admin associated with it.  More likely they'd just say "You can't pay into one and/or no more bonuses will be payable after 6 April 20XX".

Share this post


Link to post
Share on other sites
5 hours ago, scottbeard said:

I'd be very surprised if they scrapped it half way through a tax year, since that has so much awkward admin associated with it.  More likely they'd just say "You can't pay into one and/or no more bonuses will be payable after 6 April 20XX".

Yes, true in that scenario, but if govt decide / are forced to allow withdrawals without taking back the bonus, then cutoff has to be day of announcement to prevent obvious abuse.

Share this post


Link to post
Share on other sites

A cynical scheme to use tax payers money to inflate house prices whilst pretending to 'help'. Nothing more.

Share this post


Link to post
Share on other sites
On 06/08/2018 at 19:44, ftb_fml said:

Thanks - my concern is really that if the banks are able to retain 25% of the balance in the event of a withdrawal that's not for a house purchase or retirement, presumably they'd also have the ability (if instructed by the government) to refuse to pay out the full sum and only return the capital and the pittance paid in interest. 

Such behaviour would seem pretty tame in comparison to a full-scale bail-in, for example. 

For someone fairly young opening one, 40-50yrs is a long time for the goalposts to be moved!

Nice idea; although I can't see a lot of people staving off a purchase for the ability to save another grand (each) a year.. especially if they're paying 8-12 times that in rent during that period. 

Potentially a tidy little incentive for those of us sitting it out in anticipation of a crash though :)

 

The latter applies to me! Wife and I deposited the max in Mar 18... £2k bonus. Same again in Mar '19 £2k bonus. Sane again Apr '19 £2k bonus. So £6k bonus between us. After 20yrs of renting and being shafted... I'm not saying no to that.

Just to add first year of LISA bonus was end of year. After that bonus is almost instant.

Share this post


Link to post
Share on other sites
On 06/08/2018 at 19:49, The Spaniard said:

Under certain circumstances, I don't see much wrong with a Stocks and Shares LISA for retirement saving, but maybe I am missing something?

For example, each year until you are 50, invest £5,000 in large, long-established global equity investment trusts (e.g. BNKR, WTAN, ATST, FRCL, etc ...) at a cost of £4,000. Over twenty or thirty years this should grow into a substantial pot.

Then leave the LISA to grow for a further ten years until you are 60, at which time the tax free assets are all accessible to do with as you wish.

The stockbroker custody charges for a S&S LISA are a fraction of the equivalent SIPP charges, plus you can't run foul of pension contribution caps.

For a 20% taxpayer under 50 saving £5,000 p.a. LISA vs SIPP seems to be a close call. For a higher rate taxpayer making larger contributions the SIPP becomes more attractive, plus you can carry on contributing to a SIPP until you are 75. You can of course have both a LISA and a SIPP.

SIPPs are generally not subject to IHT, whereas LISAs are.

IMO the most likely government change to LISA regulations might be to give access to the assets at an age earlier than 60 - to get money circulating into a moribund economy. No downside to that.

Thanks for the detailed breakdown! While I agree (with my very limited knowledge) that it looks pretty viable on paper, I'm personally very wary of the stock market given its ridiculous current highs and again your argument assumes that the government don't pull the rug in some other way. Conversely though as you suggest; perhaps any future government intervention could be in our interests.. but I think it could go either way and there's more uncertainty than I'd like in such a long-term product.

That said I generally don't trust other pension products due to the state of the stock market either..

On 06/08/2018 at 20:01, UnconventionalWisdom said:

Like most on here, I'm also worried they could screw us over (further) with amything. They do have that ability as you are able to with draw the money out and pay a 25% penalty upon withdrawal if done before retirement/House purchase. But that would bad and I think anyone who had an account would go mad. I would recommend a stocks and shares one as the interest rates are crap from Skipton (the only cash provider as far as I'm aware). 

I'm sure people would go mad, but it wouldn't be the first time the government have screwed the average joe, would it?
I believe the Skipton ISA is the only cash variant available and I actually pulled my finger out and got one a month or so ago :)

On 07/08/2018 at 13:22, scottbeard said:

In theory yes, because in theory the government could pass laws to confiscate just about anything. In practice I think part of the point of the bonus being paid year by year is that - unlike, say, the tax-free lump sum from pensions (which is all paid at retirement) - with LISAs they've paid you the benefit "up front" which makes it optically much harder to take away.

What seems EXTREMELY unlikely to me in all but apocalyptic scenarios is the idea of them confiscating the lot.  Therefore it feels like you can invest in a stocks & shares LISA and it's basically just like investing in stocks & shares yourself except you'll (probably) get a nice 25% top-up on it.

Yup; I guess it depends how little trust you have in the governement and how far you think the next catastrophic financial event will go. Personally I'm no optimist on either front!

10 hours ago, Wayward said:

A cynical scheme to use tax payers money to inflate house prices whilst pretending to 'help'. Nothing more.

Probably; perhaps I'm blinkered being of the demographic that's being "helped" however I can't see it being anywhere near as damaging (to the buyer or the market as a whole) as HTB.. Since the government makes a habit of spunking orders of magnitude more public money on placating / lining the pockets of far less needy recipients (bank bailouts for example) I'm certainly not going to turn my nose up at taking some where I can get it.

1 hour ago, Sausage said:

The latter applies to me! Wife and I deposited the max in Mar 18... £2k bonus. Same again in Mar '19 £2k bonus. Sane again Apr '19 £2k bonus. So £6k bonus between us. After 20yrs of renting and being shafted... I'm not saying no to that.

Just to add first year of LISA bonus was end of year. After that bonus is almost instant.

Good for you! We were late to the party but have at least taken the first step and got our first bonus a few weeks ago. In a perpetually-growing and grossly overpriced market these little incentives (LISA, removal of stamp duty) mean little, however against a more realistically priced post-correction purchase could represent a pretty decent saving. 

 

Share this post


Link to post
Share on other sites

Have a S&S LISA for retirement. Just another option to hedge bets on future finances and policy. But I can see why Government are having second thoughts on it (effective basic rate tax free in via bonus, during and out), as don't think investment bungs to wealthier under 40s should be a priority. As a deposit booster will prove self-defeating, like other demand subsidies.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 140 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.