Lifetime ISA


(Jeff puckering) #1

Is this something that could be offered by freetrade for the gov bonus? And what are people’s opinion on it in general?


(Vladislav Kozub) #3

Yes, the state adds 25% and 25% is the penalty. But as the penalty is paid from the 125% (after the bonus is received), it turns into an effective 6.25% loss if redeemed for other purpose than First Time Buy home or after the age of 55 (58 as of 2028).

S&S LISA is absolutely great for the later life. The government gives you up to £32,000 for free, add the growth of your shares, you are looking (potentially) at least at over £100,000 over the 30-40 years period.

For the home purchase not so great, you will have to go with the market rather than your own plans because crystallising your capital during bear market is bonkers, you will be better of with HTB ISA.

I would love to have LISA with Freetrade as it will effectively be a rare service that not many firms provide, HL, AJ and Skipton are the only ones I am aware of. Would be great to have a facility to consolidate your capital with one entity offering all major account types and with no need to have multiple brokers.


(Jeff puckering) #4

Without knowing the full implications of the LISA it looks like a no brainier on the face of it, if your happy locking it away until 60.

My other thought, from a freetrade growth/profitability point of view, is that the target audience would have an additional incentive for the paid service. Myself and most who are starting from scratch would just have the basic account but getting £1k a year from the gov would make the £3 isa or even alpha account seem more attractive.

Again publicising the long term value of having a subscription fee over a x% management fee for something this generation is getting constant attention for (saving for retirement) could piggy back all other advertising on the subject.


#5

From a personal POV, I’m not sure on LISAs. Think the lack of flexibility is a big hindrance.

You have to be very sure you’re planning to buy and that you’re good with the timeframe to do so.

If you are though, 10 years of saving full amount equals an extra 10k (£50k overall). Not a bad bonus at all for a house deposit.


(Vladislav Kozub) #6

S&S we are talking about, imagine starting after a few year of bear market staright into bull and 7-10 per cent growth. That £50,000 will at least double’n’half. :wink:


#7

At which point house prices will have shot to the moon. :man_facepalming: A few points:

  1. “WARNING! Unless you’re a self-employed basic-rate taxpayer, using a pension to save for retirement is likely to be far better than a LISA” Source: https://www.moneysavingexpert.com/savings/lifetime-ISAs
  2. Offering LISA can be a good draw as not many companies offer LISA and so you are more likely to be mentioned when people like Martin Lewis talk about it. Starling signup crashed this week following a mention by him.
  3. Maybe after the app launches gauge community demand for LISAs.
  4. The penalty for withdrawing is underhanded. In a lot of ways these measures are so the politicians can say look we’re doing xyz to help people save for retirement and get on the housing ladder. Funny how we’re expected to plan for the distant future when they can’t even decide on the immediate future.

#8

Yep just thinking starting capital; gains in tow are the secret sauce.

Consider as well though that 10 years of return is graduated over 10 years of contributions too. Not 50k from the outset.


#9

Well maybe - I can’t predict the next 10 years of the housing market but consistent hefty growth isn’t a dead cert, especially with Brexit. How much higher can the price to income ratio go?

The best thing to do with a LISA is if you’re certain you’re going to buy a home in the not too distant future then use it to supplement a more flexible vanilla ISA. Realistically it’s a relatively small edge in the property market. But an edge nonetheless.

I reckon the extra withdrawal penalty is more a disincentive strategy like pension saving. A full extra 6.25% over what the government put in is cheeky though.


#10

There’s a trend for longer mortgages and maybe there’s hope salaries will rise over time. Doubt it but maybe under that basis prices will go higher still. Or maybe the salary averages will increase.

Yes. Definitely behavioural, it’s nuanced, and underhanded.

btw The face palm was for myself.


#11

#12

I’ve started seeing recommendations for LISA, as in the time is now before/if it’s scrapped.

Got me thinking - are people now considering opening a LISA when they previously didn’t?


As a Survey :smile:

  • Maybe
  • Yes
  • No

0 voters


(Louis Otto) #13

I’ve had a LISA for over a year now, just about to buy a home (exciting times) put in 8k, and got 2k free. I can’t think of a situation where this isn’t good - it pays for the solicitors fees, valuation etc just in the free money they give you.

I totally get that my outlook would be massively different if the market crashed before I wanted to buy, but still…


(Christopher) #14

Congratulations @Louis !


#15

Does anyone know if Freetrade are considering offering a Lifetime ISA? I have one knocking about that I’d consider moving in…


Do you / will you use ISAs?
(James White) #16

Def would like to open a LISA next FY so please add this to your platform FreeTrade!! :slight_smile:

You don’t get much for free these days but £1k for saving £4k is a pretty good thing and although you can’t access until 60 (im planning to use the LISA for retirement) i probably won’t be in a position to retire before that anyway.

I’m looking to use £ cost averaging (regular savings every month) and try to spread risk by investing in 4 to 5 funds/trackers so a zero fee to buy would be amazing.


(Sam Johnson) #17

Better if put to use as a second pension, larger government bonus due to having the account longer and if with a broker you can invest it. Additionally, the money at the end can be taken out tax free, as oppose to sipp’s where only 25% is tax free with the rest going on your taxable income.

in the short term getting an extra 2k might be good, but the benefit can be much greater if used for a secondary pension.


(Sam Johnson) #18

On my first year I invested 4K, got the 1k bonus and invested the 5k into a fund which has made 17% so far this financial year.

Even if you add the average yearly increase on investment which is around 10-12%… over a period on 30+ years for people under the age of 30 you will have a very nice pot of money in your retirement.

Problem with a lot of the younger generation is that most don’t realise this exist, nor the potential that you can gain


(Emma) #19

Curious about your source for the 10-12% yearly increase figure


(Vladislav Kozub) #20

Last few years have been quite bullish, up to 20% annually, hence may be the assumption :slight_smile:

A reasonable estamate for an annualised 30-years’ period market growth could be ~7% (~5% if conservative).