Lifetime ISA

[northwichcat]

Osborne has just announced this in his budget. There's a factsheet on it here: https://www.gov.uk/government/uploa...t_data/file/508117/Lifetime_ISA_explained.pdf

It seems you can use it to save for buy for a house or for your retirement. However, the question is why launch a Help2Buy ISA and then launch this as a different product with different T&Cs the following year?

 

[Dave1987]

The Help to Buy ISA is far more restrictive than this new one announced today but you can use both for a deposit on a mortgage.

The Help to Buy ISA can only be used for properties below £250K and has an extremely protracted process for claiming the top up. There is a cap of £3K on the amount you can claim, cap on the amount you can initially put in of £1600 and a cap of £200 per month that you can put into it.

The new Lifetime ISA is far far less restrictive. You can pay up to £4k per year in and it will be automatically topped up by the Govt at a ratio of £1 for every £4 you put in that year. You can use the for a lot more as well, you can use it to top up your deposit for your mortgage with from what I can see no limits on the value of the property. Also you can keep putting into it up until the age of 50 (with it being topped up each year) and then use it to top up your pension.

As far as I can tell this is an amazing ISA to have and will be opening one straight away next year.

 

[northwichcat]

The Help to Buy ISA is far more restrictive than this new one announced today but you can use both for a deposit on a mortgage.

You'll be able to save in a Help2Buy ISA and a Lifestyle ISA for a home but you'll only get one bonus if you do. Launching two different products aimed at the same people for the same purpose suggests a plan for a Lifestyle ISA didn't even exist at the last election.

You can use the for a lot more as well, you can use it to top up your deposit for your mortgage with from what I can see no limits on the value of the property. Also you can keep putting into it up until the age of 50 (with it being topped up each year) and then use it to top up your pension.

It sounds like you'll have to specify the purpose at the time of opening a Lifetime ISA as any withdrawals from a retirement one before you reach 60 will incur penalties, while to get a first home bonus you'll have to close the account and present a special letter you'll be given on account closure to your solicitor, who'll be able to apply for the bonus when you take out a mortgage. It isn't clear if you have a Lifestyle First Home and a Lifestyle Retirement one at the same time.

 

[GB]

The way I read both is they can be used for a first home. Therefore for people like me who are on the property ladder but at the bottom it is next to useless as I can't use it for a deposit towards a new home.

 

[Dave1987]

The way I read both is they can be used for a first home. Therefore for people like me who are on the property ladder but at the bottom it is next to useless as I can't use it for a deposit towards a new home.

Indeed they can both be used but the Help2Buy ISA has a cap on the property value it can be used on and severe caps on what you can put into it at a time.

Yes you can only use it for you first home but it will provide a nice little money pot for when you retire.

 

[northwichcat]

Indeed they can both be used but the Help2Buy ISA has a cap on the property value it can be used on and severe caps on what you can put into it at a time.

You can put in £200 a month. I think the biggest problem was the initial month's cap - the tax year starts in April but they didn't launch the product until last December but if you opened a Help2Buy ISA in December you could only put in £1200 in the first month, so you can't even put an average of £200 a month over the course of the current tax year. Plus there was no option of putting in savings you already had for a house deposit from previous tax years.

 

[dcsprior]

At first look, doing this towards a pension doesn't seem like a good idea. basic rate taxpayer could earn £100 gross, pay £12 NI, putting £88 into their pension

Or they could earn £100 gross, pay £20 Tax and £12 NI, leaving them £68 to put into this ISA; the 25% bonus would be £17, taking the total up to £85 - less than they'd have had putting it straight into their pension.

I presume I must be missing something?

 

[Dave1987]

At first look, doing this towards a pension doesn't seem like a good idea. basic rate taxpayer could earn £100 gross, pay £12 NI, putting £88 into their pension

Or they could earn £100 gross, pay £20 Tax and £12 NI, leaving them £68 to put into this ISA; the 25% bonus would be £17, taking the total up to £85 - less than they'd have had putting it straight into their pension.

I presume I must be missing something?

This Lifetime ISA is none tax deductible when you draw the money out over 60 whereas putting it into a pension pot you pay tax on it when you draw it out.

 

[dcsprior]

This Lifetime ISA is none tax deductible when you draw the money out over 60 whereas putting it into a pension pot you pay tax on it when you draw it out.

Aha, so I was indeed missing something. Seems like a very good deal then, provided you're not paying tax at a higher rate now than you will in retirement.

Having searched some more on this, I see that Money Saving Expert's Martin Lewis has suggested as possible an ulterior motive for this http://www.moneysavingexpert.com/savings/lifetime-ISAs:

"The real cleverness behind this for the Treasury is that if people use this rather than a pension, as it comes from taxed income, it gets the Treasury tax revenue now. If they put it in a pension, the Treasury has to wait years until it gets tax. So, this could be Mr Osborne cleverly grabbing cash out of a future chancellors' pockets."

 

[northwichcat]

A Lib Dem, who was in the Treasury under the Coalition government, has warned people against using the Lifetime ISA over paying in to a work place pension scheme.

One thing to remember for long term schemes is a future government many scrap them or replace them with something else. The Blair government got rid of Major's TESSAs in favour of ISAs.

 

[ComUtoR]

As far as I can tell this is an amazing ISA to have and will be opening one straight away next year.

I would have done exactly that. I'm over 40 !!!

 

[Tetchytyke]

It's great for the Trustafarians, whose parents get to give them four grand a year and the taxpayer gives them a 25% Brucie Bonus. Not so great for those of us who, thanks to a decade of below-inflation pay rises and above-inflation train fares and rent, now no longer have a pot to widdle in.

As for their longevity, I refer you to Child Trust Funds.

 

[theblackwatch]

I would have done exactly that. I'm over 40 !!!

Same here :-x Obviously age discriminations doesn't apply in this case, perhaps it's a case that the govt doesn't want to have to pay anything out until 2037...

 

[northwichcat]

Same here :-x Obviously age discriminations doesn't apply in this case, perhaps it's a case that the govt doesn't want to have to pay anything out until 2037...

Neither does it apply for benefits or the minimum wage, somehow a 24 year old needs less money to live on than a 25 year old!

 

[Emyr]

After butchering the recovery by failing to understand the Keynesian role of government spending as a driver for the economy, now Gideon wants to disincentivise consumer spending.

We'll be in a worse state than Greece by the next general election.

 

[DarloRich]

The Help to Buy ISA is far more restrictive than this new one announced today but you can use both for a deposit on a mortgage.

The Help to Buy ISA can only be used for properties below £250K and has an extremely protracted process for claiming the top up. There is a cap of £3K on the amount you can claim, cap on the amount you can initially put in of £1600 and a cap of £200 per month that you can put into it.

The new Lifetime ISA is far far less restrictive. You can pay up to £4k per year in and it will be automatically topped up by the Govt at a ratio of £1 for every £4 you put in that year. You can use the for a lot more as well, you can use it to top up your deposit for your mortgage with from what I can see no limits on the value of the property. Also you can keep putting into it up until the age of 50 (with it being topped up each year) and then use it to top up your pension.

As far as I can tell this is an amazing ISA to have and will be opening one straight away next year.

last year this would have been a superb product for me. Such is life. It does seem far to generous!

Now if only we could make it easy for the young to be in a position TO save for a house.
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It's great for the Trustafarians, whose parents get to give them four grand a year and the taxpayer gives them a 25% Brucie Bonus. Not so great for those of us who, thanks to a decade of below-inflation pay rises and above-inflation train fares and rent, now no longer have a pot to widdle in.

As for their longevity, I refer you to Child Trust Funds.

edit - beaten to it!

 

[Busaholic]

I you save in this way but find you are not accepted for a mortgage (as is happening to an increasing number of people) then you won't be able to get your money back until you're 60, unless you want a 5% penalty.

 

[thebigcheese]

Sounds a great way for banks to build up capital. I wonder what sort of interest rates will be available for these accounts?

 

[Dave1987]

After butchering the recovery by failing to understand the Keynesian role of government spending as a driver for the economy, now Gideon wants to disincentivise consumer spending.

We'll be in a worse state than Greece by the next general election.

Ow please you only have to look at Greece to understand the mess we would have been in if Govt spending had been maintained at the level it was in 2009. Greece refused to cut spending or increase taxes or actually get their citizens to actually pay the taxes they should which is why they are in the mess they are in. At least this incentivises people to actually save.

 

[DarloRich]

Ow please you only have to look at Greece to understand the mess we would have been in if Govt spending had been maintained at the level it was in 2009. Greece refused to cut spending or increase taxes or actually get their citizens to actually pay the taxes they should which is why they are in the mess they are in. At least this incentivises people to actually save.

Interesting, don't you think, that it is the poorest in society that seem to be paying for the mistakes of others. I find it odd that the burden isn't shared.

BTW - our government doesn't seem to have a very good track record in getting all of their mates to actually pay the taxes they should

 

[Tetchytyke]

Ow please you only have to look at Greece to understand the mess we would have been in if Govt spending had been maintained at the level it was in 2009.

Yet under Gideon the national debt has increased from £900bn to over £1.5tn.

actually get their citizens to actually pay the taxes they should

You mean like Google and Vodafone do?

However it is interesting that you're against "Government spending" yet think that giving out £1000 a year to savers is "excellent news". You're going to have to explain your logic on that one.

 

[Dave1987]

Yet under Gideon the national debt has increased from £900bn to over £1.5tn.

I've answered that on another thread.

You mean like Google and Vodafone do?

Well the reports I read on the Google tax fiasco said it was money owed from back in 2005. Who was in power between 2005-2010? Ow yeah it was Labour! Clearly they didn't do a very good job of getting ANY tax out of these firms.

However it is interesting that you're against "Government spending" yet think that giving out £1000 a year to savers is "excellent news". You're going to have to explain your logic on that one.

Yup I put thousands of pounds a year into the system so why shouldn't I see something out of it? Or in your eyes are people who work for a living only allowed to contribute to the exchequer? I'm against the Government spending money on people who believe the world owes them a living and expect everything handed to them on a plate.

 

[DarloRich]

I'm against the Government spending money on people who believe the world owes them a living and expect everything handed to them on a plate.

Like those awful disabled people who deserve to have their benefits cut to encourage them to look, harder, for work? That will learn them benefit scum! (That ignores the significant challenges, biases, prejudices and obstructions many disabled people face in entering the job market)

Odd how you don't seem to be against rich people thinking it is OK to rob us all blind by not paying their tax.
--- old post above --- --- new post below ---

However it is interesting that you're against "Government spending" yet think that giving out £1000 a year to savers is "excellent news". You're going to have to explain your logic on that one.

because savers are decent people who work hard and put money away and deserve help. They are strivers.

People on benefits are scum who are to blame for all of the problems within our country and should be whipped in the street as penance for falling on hard times, being ill or infirm, elderly or disabled or unable to find work and then daring to ask for help from the government. They are scroungers.

 

[Dave1987]

Like those awful disabled people who deserve to have their benefits cut to make them look for work harder? That will learn them benefit scum!

Odd how you don't seem to be against rich people thinking it is OK to rob us all blind by not paying their tax.

When on earth did I say ANYTHING about "awful disabled people" or "benefit scum"?

One presumes you class anyone that earns above minimum wage as "rich"?

 

[DarloRich]

When on earth did I say ANYTHING about "awful disabled people" or "benefit scum"?

One presumes you class anyone that earns above minimum wage as "rich"?

not at all - that would be silly. Although the more you earn the more you seem able to dodge your taxation responsibility and the less inclined the government seems to be to come after you.

Whilst you may not have used those terms the undertone of the arguments you use is clear. You feel people on benefits expect the government to provide them with a living. While that may be true for some it isn't true for the majority, despite what the likes of the Mail and Telegraph might have you believe.

 

[Dave1987]

not at all - that would be silly. Although the more you earn the more you seem able to dodge your taxation responsibility and the less inclined the government seems to be to come after you.

Whilst you may not have used those terms the undertone of the arguments you use is clear. You feel people on benefits expect the government to provide them with a living. While that may be true for some it isn't true for the majority, despite what the likes of the Mail and Telegraph might have you believe.

Well YOUR undertone suggests you feel anyone earning more than minimum wage is "rich" and should be taxed to death accordingly!

I feel that anyone who is genuinely disabled should get all the help and support they need. Like I said it's very curious how when it became harder to claim disability benefits loads of people suddenly became well enough to work again.

 

[DarloRich]

Well YOUR undertone suggests you feel anyone earning more than minimum wage is "rich" and should be taxed to death accordingly!

I feel that anyone who is genuinely disabled should get all the help and support they need. Like I said it's very curious how when it became harder to claim disability benefits loads of people suddenly became well enough to work again.

No it doesn't. I want a fair share of the burden with everyone paying their share. I want benefit cheats dealt with and I want tax cheats dealt with in the same manner and perused with the same vigor as benefit cheats, regardless of who they or their station in life.

BTW the disability figures changed because people simply switched to another form of benefit, the same as they did when the government of the time wanted them of the jobless figures and pushed them onto disability

 

[Dave1987]

No it doesn't. I want a fair share of the burden with everyone paying their share. I want benefit cheats dealt with and I want tax cheats dealt with in the same manner and perused with the same vigor as benefit cheats, regardless of who they or their station in life.

BTW the disability figures changed because people simply switched to another form of benefit, the same as they did when the government of the time wanted them of the jobless figures and pushed them onto disability

Well there we are then we both have misgivings about each others opinions then don't we.

The number of people on benefits has dropped as a whole since 2010 quite a lot so it's not just a case of shuffling them around. And the number of people in work has slowly risen in recent years.

 

[DarloRich]

lets agree to disagree then. I think this product is a good one and it is a good idea to try and help people save. I wish it was being paid for by bankers rather than the disabled though.

 

[Tetchytyke]

My issue with the product is there is no limit to who can access it, meaning the wealthiest will gain the biggest benefit. I don't believe in taxing people till the pips squeak but not I do I believe in giving rich people £40,000 tax free from Treasury coffers. I'd have less of an issue if the product was only available to people who have no savings, but it's available to billionaires who, quite frankly, shouldn't be getting state handouts.

What the government should have done is increased returns through NS&I bonds, which would have had the bonus of cutting the national debt.
--- old post above --- --- new post below ---
As for disability numbers dropping when the rules changed, this was the specific intention of the rules. One of the changes meant you don't get mobility benefits if you can use a manual wheelchair- according to this government, a bloke with no legs isn't disabled if he has good biceps.

It's also worth pointing out that about 65% of benefit entitlement decisions are shown to be wrong on appeal, so the government have (rather than sort out the decision making) simply restricted rights to appeal.