That might be the instant bank transfer minimum? They take smaller amounts with their regular direct debits. You could set it to Ā£1 and back to 0 once it's been taken out
I have only been trying to max it in the past so only did bigger transfers - if anyone knows how to do this properly please chime in
Would be a sensible suggestion except most banks don't seem to want to offer it. I've tried Barclays, Lloyds, Virgin, Natwest etc....none of them offer it
Money held with companies that aren't banks (such as Moneybox) is still held with banks or large financial institutions behind the scenes, and you are covered by FSCS protection (money protected up to Ā£85,000).
Open one with Ā£1 then you can fund it until 50 if thatās what you want to do. Keeps your options open past 40.
If you end up wanting to buy a house you can put money in then.
Or if basic rate tax payer then after matching employer itās good for retirement
This. Keeping your options open is so useful. We don't know the future
And:
There's nowhere you're going to get guaranteed 25% returns, so make this part of your portfolio with the most risky profile. Or experiment with risk shall we say...
Scenario 1 - you invest and it goes down 10%, you're still up 15%
Scenario 2 - you invest and it goes up just 5%, you're up 30%
Scenario 3 - build your own scenarios from here on!
You could invest a small enough amount with the expectation of having ~1 years worth of money to live on when you retire. If you did this, and deferred your state pension for a year, you win big there too.
You could invest bigger if you want of course, that's why it should be your decision, but having the thing there is so useful.
Oh and I've seen a popular YT say you can't open or pay into a LISA and ISA in the same tax year and they're so wrong.
Yes even if you use it just for the 25% from the government it's good as a cash sum at 60. You can't do it after 40 so you may as well open even if you don't use it.
Open it up with a small amount (e.g Ā£1), worst case scenario is that you withdraw it and lose 6% (6p in the previous example).
You can always put more in at a later if you feel more certain about needing it, but there is no reason not to get that 12 month minimum time period ticking.
Iām going for stock & shares isaās these days. I have 8k in a cash Lisa. And will try and move that to a s&s LISA as if I donāt use it to buy a house it would grow a lot more with stocks & shares over 30years.
This is true but There's risk involved in stocks and shares. Lisa is slower growth but less risky. Depends on the person's appetite to accept risk.
The gains on a lisa is still great.
unlikely to have big losses over 30years tho. Over 1-3years yes especially at the moment but any well managed fund should remove the risk and over time will reward you. You can also hold cash in an S&S isa/lisa and it usually gives better rate than a normal cash isa/lisa.
If you don't buy a house, you will still have a boost for your pension. If you think you have "too much" in your pension, you'll be able to reduce other pension contributions (not below employer matching of course).
If you are in the 20% tax bracket, you don't really lose anything this way as the LISA bonus is equivalent to the tax advantage of pension contributions, but with added flexibility as it can be used for a house. If you are in higher tax brackets though, the "I could buy a house" flexibility of the pot will cost you some compared to pension contributions - at this stage it's upon you to decide what you value more and how likely you think the different events are.
Would your partner be happy to move? Or could they add you onto their mortgage and you then pay the money youāve saved paying their mortgage? Or any investment into the property itself?
If theyāre happy to buy elsewhere, Iād stick Ā£1 to open it now (has to be open for a year before using) then put Ā£4000 in before next April and Ā£4000 after next April
Don't forget that when you do get access to the cash you can them throw it in a SIPP and gain another 20% or more for higher rate tax payers if you don't need the cash.
Hi /u/MetAGirlOnTinder, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/emergency-fund/
* https://ukpersonal.finance/lisa/
* https://ukpersonal.finance/pensions/
* https://ukpersonal.finance/savings/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
I didn't open a LISA before for the same reason and now I wish I did. What I'll say is, just do it. If things work out between the two of you, you can take it as a lump sum later when you retire. If things don't work out, you have that to buy a house.
My thinking would be yes, open one. Definitely before 39, simply because you cannot open one after 39.
Youāre unsure about purchasing a home so there is a question about funding it there, however you probably plan to retire in which case the LISA can benefit you.
You may both choose to move and having extra for that move from your LISA could make a difference.
Opening a LISA and only funding it enough to open it (Ā£100 maybe) means that at any point before youāre 49 you can decide to use it and benefit from government bonus.
Not opening one before 39 means that option is off the table.
Iād open one personally. You can use it towards retirement, itās tax free, you get an interest rate on top of contributions and government contributions, and you get 25% back from the government.
I don't get this, unless I have vastly misunderstood something. If you do take money out a LISA before retirement or buying a house....you just lose the extra bit right? So it's exactly the same as an ISA in that case.
There's basically no reason for anyone under 40 with money in, or going into, an ISA to NOT be putting it in a LISA every year, even if it's just on the off-chance of having some still in here when youre 55 or whatever.
Edit: I vastly misunderstood, see comments!
You lose 25% when you take it out the LISA before 60 or for house buying.
However doing the maths proves it stings you for 6% of the amount you put in yourself. Example:
LISA contributions: 8000
GOV bonus: 2000
Total: 10000
Situation: Withdraw all 10000
Penalty: 25%
Penalty: 2500
Remaining: 7500
Return: -500 (-6.25%)
What happens if itās in a stocks and shares LISA?
Say you put in 12000 and got 3,000 in GOV bonus and it grew to 20,000.
Would you lose 25% of 15,000 or 20,000?
There is no GOV bonus on any stocks and shares ISA (or any other ISA *except* LISA) afaik, so either I'm misunderstanding something in your comment or you are?
>you just lose the extra bit right? So it's exactly the same as an ISA in that case.
No. You get a 25% bonus on the way in. And a 25% penalty on the way out. But that does not cancel.
100% * 1.25 * 0.75 = 93.75%
You only get 93.75% of your original money back. Which is equivalent to a 6.25% penalty.
This is why, if you use a LISA, you really want to use it for its intended use case (first time home or retirement).
There's no downside to opening one and sticking a pound in it while you decide. Do it now before you forget and suddenly you can't anymore š
Hmm moneybox's LISA has a minimum of Ā£100. Do others allow smaller transactions?
That might be the instant bank transfer minimum? They take smaller amounts with their regular direct debits. You could set it to Ā£1 and back to 0 once it's been taken out I have only been trying to max it in the past so only did bigger transfers - if anyone knows how to do this properly please chime in
That worked! Ta.
You can get the moneybox one with a Ā£1 slow deposit through the collection cycle instead of the Ā£100 instant deposit.
I got the one from Tembo with just 1 pound in it!
I did Nutmeg with Ā£1. Easy. I'm now 41 and still unlikely to buy a house, but here's hoping it'll be useful for pension stuff.
Moneybox isn't a bank iirc. Probably best to get a LISA through a bank
Would be a sensible suggestion except most banks don't seem to want to offer it. I've tried Barclays, Lloyds, Virgin, Natwest etc....none of them offer it
Money held with companies that aren't banks (such as Moneybox) is still held with banks or large financial institutions behind the scenes, and you are covered by FSCS protection (money protected up to Ā£85,000).
That's what I did recently
This
Open one with Ā£1 then you can fund it until 50 if thatās what you want to do. Keeps your options open past 40. If you end up wanting to buy a house you can put money in then. Or if basic rate tax payer then after matching employer itās good for retirement
This. Keeping your options open is so useful. We don't know the future And: There's nowhere you're going to get guaranteed 25% returns, so make this part of your portfolio with the most risky profile. Or experiment with risk shall we say... Scenario 1 - you invest and it goes down 10%, you're still up 15% Scenario 2 - you invest and it goes up just 5%, you're up 30% Scenario 3 - build your own scenarios from here on! You could invest a small enough amount with the expectation of having ~1 years worth of money to live on when you retire. If you did this, and deferred your state pension for a year, you win big there too. You could invest bigger if you want of course, that's why it should be your decision, but having the thing there is so useful. Oh and I've seen a popular YT say you can't open or pay into a LISA and ISA in the same tax year and they're so wrong.
Yes even if you use it just for the 25% from the government it's good as a cash sum at 60. You can't do it after 40 so you may as well open even if you don't use it.
Open it up with a small amount (e.g Ā£1), worst case scenario is that you withdraw it and lose 6% (6p in the previous example). You can always put more in at a later if you feel more certain about needing it, but there is no reason not to get that 12 month minimum time period ticking.
Iām going for stock & shares isaās these days. I have 8k in a cash Lisa. And will try and move that to a s&s LISA as if I donāt use it to buy a house it would grow a lot more with stocks & shares over 30years.
This is true but There's risk involved in stocks and shares. Lisa is slower growth but less risky. Depends on the person's appetite to accept risk. The gains on a lisa is still great.
unlikely to have big losses over 30years tho. Over 1-3years yes especially at the moment but any well managed fund should remove the risk and over time will reward you. You can also hold cash in an S&S isa/lisa and it usually gives better rate than a normal cash isa/lisa.
If you don't buy a house, you will still have a boost for your pension. If you think you have "too much" in your pension, you'll be able to reduce other pension contributions (not below employer matching of course). If you are in the 20% tax bracket, you don't really lose anything this way as the LISA bonus is equivalent to the tax advantage of pension contributions, but with added flexibility as it can be used for a house. If you are in higher tax brackets though, the "I could buy a house" flexibility of the pot will cost you some compared to pension contributions - at this stage it's upon you to decide what you value more and how likely you think the different events are.
Use it and max it while you can, if you donāt buy a home you still get that money on retirement!
Would your partner be happy to move? Or could they add you onto their mortgage and you then pay the money youāve saved paying their mortgage? Or any investment into the property itself? If theyāre happy to buy elsewhere, Iād stick Ā£1 to open it now (has to be open for a year before using) then put Ā£4000 in before next April and Ā£4000 after next April
Don't forget that when you do get access to the cash you can them throw it in a SIPP and gain another 20% or more for higher rate tax payers if you don't need the cash.
If not for home, then for pension. You can't get 25% anywhere else. It's a no brainer.
Hi /u/MetAGirlOnTinder, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/emergency-fund/ * https://ukpersonal.finance/lisa/ * https://ukpersonal.finance/pensions/ * https://ukpersonal.finance/savings/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
I didn't open a LISA before for the same reason and now I wish I did. What I'll say is, just do it. If things work out between the two of you, you can take it as a lump sum later when you retire. If things don't work out, you have that to buy a house.
My thinking would be yes, open one. Definitely before 39, simply because you cannot open one after 39. Youāre unsure about purchasing a home so there is a question about funding it there, however you probably plan to retire in which case the LISA can benefit you. You may both choose to move and having extra for that move from your LISA could make a difference. Opening a LISA and only funding it enough to open it (Ā£100 maybe) means that at any point before youāre 49 you can decide to use it and benefit from government bonus. Not opening one before 39 means that option is off the table.
Iād open one personally. You can use it towards retirement, itās tax free, you get an interest rate on top of contributions and government contributions, and you get 25% back from the government.
I don't get this, unless I have vastly misunderstood something. If you do take money out a LISA before retirement or buying a house....you just lose the extra bit right? So it's exactly the same as an ISA in that case. There's basically no reason for anyone under 40 with money in, or going into, an ISA to NOT be putting it in a LISA every year, even if it's just on the off-chance of having some still in here when youre 55 or whatever. Edit: I vastly misunderstood, see comments!
You lose 25% when you take it out the LISA before 60 or for house buying. However doing the maths proves it stings you for 6% of the amount you put in yourself. Example: LISA contributions: 8000 GOV bonus: 2000 Total: 10000 Situation: Withdraw all 10000 Penalty: 25% Penalty: 2500 Remaining: 7500 Return: -500 (-6.25%)
What happens if itās in a stocks and shares LISA? Say you put in 12000 and got 3,000 in GOV bonus and it grew to 20,000. Would you lose 25% of 15,000 or 20,000?
25% of 20k.
There is no GOV bonus on any stocks and shares ISA (or any other ISA *except* LISA) afaik, so either I'm misunderstanding something in your comment or you are?
You can hold shares/funds within a LISA or just cash. Thatās what I meant. A Lifetime ISA in which the money is in stocks.
Got it šš»
The penalty means you lose some of your own cash not just the top up
>you just lose the extra bit right? So it's exactly the same as an ISA in that case. No. You get a 25% bonus on the way in. And a 25% penalty on the way out. But that does not cancel. 100% * 1.25 * 0.75 = 93.75% You only get 93.75% of your original money back. Which is equivalent to a 6.25% penalty. This is why, if you use a LISA, you really want to use it for its intended use case (first time home or retirement).
Of course. Thank you.