Author Topic: Should we be concerned about locking up our savings in a LISA?  (Read 3169 times)

shelivesthedream

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Should we be concerned about locking up our savings in a LISA?
« on: September 18, 2017, 06:13:00 AM »
We recently moved house so took a break from investing for a few months for cashflow reasons. Now that everything’s settled down again we’re ready to invest a lump sum (in my name) and to set up a regular deposit (in my husband’s name). Just before I pull the trigger, I want to check that we’re not stupid to be locking our money in a LISA.

Details:
26 and 27
He works and thinks he wants to keep on working “forever”. This may well be true, but things they are a-changing. Gets a full pension at 68. Gets a house with his job so we won’t be buying (or renting) until he retires.
I’m freelance and a low earner but we’ve recently found out I’m pregnant (due in April) so am planning to be a SAHM for a while (couple of years?) and then see how I feel/what seems feasible.
Currently have 4x annual expenses saved (mostly in normal ISA, small amount in my SIPP). The deal used to be that we mostly spent his income and saved mine, but if I’m not working then we’re looking at saving around £4000/yr, but my grandmother also sends us the occasional cheque/envelope full of used fivers, so we’d max out his LISA from regular deposits and then contribute excess to mine.

Goals:
1. Prepare for conventional retirement.
2. Prepare for the possibility that my husband decides his job has changed too much and he wants to quit.
3. Prepare for children. (Husband is very anxious about this. I am not.)
4. Prepare for an earlier retirement if possible.
5. Possible future purchase of an investment property (NOT a first home).

Is there any reason I should be concerned about our future savings being locked in a LISA? Is the risk great enough to miss out on the bonus? I’m inclined to the view that we have enough normal ISA savings now that we could spend if we needed to, but I think my husband is a bit antsy, and it does well to check because whatever we decide now will be the default until big things change.

londonstache

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #1 on: September 18, 2017, 06:26:49 AM »
I think LISA is a great idea, providing:

  • You intend to use these funds for retirement or 1st property purchase ONLY and are disciplined enough to not want to 'raid the piggybank'
  • It is part of a broader investment portfolio with sufficient money in conventional (i.e. S&S) ISAs

I'd expect committed mustachians to fulfil both criteria easily. I'm pushing my LISA hard and Mrs londonstache is doing the same, although we are already property owners. The way I see it is a 25% guaranteed ROI is something to be snapped up. The downside is the restrictions around withdrawals, but I don't see this as materially different to a pension scheme in this regard. Much of the press negativity around the LISA appears to be a concern people will not fund their pension if they invest in a LISA, but again this doesn't seem to be a big issue for our happy tribe. I'm socking away 25% of my salary with plans to increase this into a pension, and the LISA is just a cherry on top of a larger cake.

However it does mean that if I am in the happy position to FI/RE, then the pattern would likely be:

  • Draw on existing investment ISAs and non-sheltered assets
  • Draw on LISA funds
  • Draw on company pensions/SIPPs
  • Draw on all of the above with a (possible) state pension added

Slightly complex and it appears I get richer as I go along, but happy to clarify this further as I continue to age like a fine wine.
« Last Edit: September 18, 2017, 06:29:12 AM by londonstache »

financialfreedom

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #2 on: September 18, 2017, 09:03:07 AM »
We aren't personally using as we are targeting early retirement at 40, and I don't like being told what I can't and can't do.

I do appreciate we are turning away 25% return, but we benefit from earlier access.

londonstache

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #3 on: September 18, 2017, 10:12:20 AM »
That I think is a critical part - what you are targeting for FIRE date. Not worth tying it up for 20+ yrs if you intend to FIRE well before then.

shelivesthedream

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #4 on: September 18, 2017, 10:23:32 AM »
My thinking is that it's going to be a fairly small percentage of our NW (for the moment, at least) so we can spend down the other investments first. We don't have a specific FIRE date in mind and are more inclined to downshift now than front load our working lives.

Roger D

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #5 on: September 18, 2017, 11:56:42 AM »
We aren't personally using as we are targeting early retirement at 40, and I don't like being told what I can't and can't do.

I do appreciate we are turning away 25% return, but we benefit from earlier access.
You don't need earlier access to ALL of your savings, so why not put some of your stache into a LISA to get the 25% bonus for your later years, and some into an ISA to get the increased flexibility for your earlier years.

The LISA limit is low enough that serious savers will max it out and will also need to invest outside a LISA.

TartanTallulah

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #6 on: September 18, 2017, 02:00:48 PM »
Many congratulations :-)

FWIW, the way events in my life unfolded, almost every long term investment I made in my 20s and early 30s (endowment policies, index-linked savings certificates, PEPs, individual shareholdings) ended up being cashed in early, often with the loss of a bonus payment. The exceptions were the £18-a-month savings plans for the children, which returned around the same amount as the total sum invested after 21 years, and my stakeholder pension plan, which I couldn't touch. So if I was giving advice based on personal experience, I'd say, "Don't put your funds in something that you can access early with a penalty, either choose something you can access penalty-free or something you can't access at all until the end of the penalty term.

But the 25% bonus is worth having, and if you have enough other investments to cover all eventualities a LISA seems like a very good idea.

BrokenBiscuits

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #7 on: September 18, 2017, 02:41:48 PM »
Surprised all the responses are so pro Lisa. If you or your husband are employed and you want to lock money away then a works pension is likely to be a better option than a Lisa.  A pension offers tax benefits at the front and a Lisa offers it at the end. Someone on a higher rate of tax would benefit even more from a pension over a Lisa.

If you are not self employed or using the Lisa to buy a home then it's probably not the best option for you. There are a number of articles to be found from googling that will go into more detail for you.

AnswerIs42

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #8 on: September 18, 2017, 04:30:53 PM »
Pension is likely to beat the LISA if you're a higher rate taxpayer, have access to salary sacrifice or matching contributions, or are in receipt of tax credits. Otherwise LISA could well be better. Still worth having enough pension to use up your tax free allowance, though.

Putting money into a LISA rather than a normal ISA could be thought of as a gamble, as to whether you're going to need the money early or not. If you don't need the money before 60, then you win 25%. If you take it out early, then you effectively lose 6.25%. So, if you think you probably won't need the money early, then the odds are in your favour - but you do have the ability to take it out if the SHTF.

shelivesthedream

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #9 on: September 19, 2017, 02:33:33 AM »
I am self-employed. It said in the first post. My husband is a basic rate taxpayer and likely to remain so. He has a workplace pension (as I said above) and I do not want to put all our eggs in that one basket.

AnswerIs42

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #10 on: September 19, 2017, 05:40:48 AM »
True, I kind-of meant that as a more generic "you" for the benefit of other people that might be reading the thread. In your particular case, LISA does indeed sound like a good idea, for some of your stash at least.

financialfreedom

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #11 on: September 19, 2017, 11:14:25 AM »
We aren't personally using as we are targeting early retirement at 40, and I don't like being told what I can't and can't do.

I do appreciate we are turning away 25% return, but we benefit from earlier access.
You don't need earlier access to ALL of your savings, so why not put some of your stache into a LISA to get the 25% bonus for your later years, and some into an ISA to get the increased flexibility for your earlier years.

The LISA limit is low enough that serious savers will max it out and will also need to invest outside a LISA.

True. We've filled both ISAs this year, but I will bear this in mind next.

Playing with Fire UK

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #12 on: September 20, 2017, 06:28:15 AM »
I generally dislike LISAs, but I think they may be right for you.

Am I right that if your husband stopped loving work you would need to move out of the free accommodation?

And that if you both retired early you would need to find accommodation?

Do you foresee other big, non-home related spending that could cause you to need to tap the existing ISAs and then LISAs before age 60?

Are you planning on massively increasing spending when your child is born? Is this part of the concern your husband has (I'm assuming financial preparation).

How much of the current 4x expenses (ace work at 26/27!) is in ISAs rather than a SIPP? If you look at the likely growth of the ISA, versus your maybe-early retirement age, how does it compare and how does that make you feel? On the back of an envelope, at 5% growth above inflation, you'll have 8x AE before age 40, and 12x AE before age 48. Combined with a pension from ~68 and a LISA for a home and/or spending after age 60 that looks pretty good to me, but it depends on whether that feels good to you.

So a LISA would be solidly helping for goals 1 and 2, and be part of the puzzle for goal 4.

shelivesthedream

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #13 on: September 20, 2017, 07:15:09 AM »
I generally dislike LISAs, but I think they may be right for you.

Am I right that if your husband stopped loving work you would need to move out of the free accommodation?

And that if you both retired early you would need to find accommodation?

Correct.

Quote

Do you foresee other big, non-home related spending that could cause you to need to tap the existing ISAs and then LISAs before age 60?
Not really, but then that's the thing about unrelated expenses! The major thing could be school fees as we may be in a position to get a REALLY substantial discount on private school, to the point where it could be £1000-£2000 a year - which is a substantial amount of money over the course of secondary school but good enough value for money that we would probably do it.

Quote

Are you planning on massively increasing spending when your child is born? Is this part of the concern your husband has (I'm assuming financial preparation).


Potential (vastly reduced) school fees as mentioned above, food, clothing, the general cost of paying for an extra person when you do things (train tickets, restaurants, theatre), a bit of flexibility to let them go on things like school trips or buy them the odd big thing (I recall with regret my own childhood campaign for a trampoline). Nothing else leaps to mind. I think my husband has general "but children are so expensive!" concerns, not anything specific. He grew up much poorer than I did so doesn't want it/them to be held back by lack of money. I don't want us to think that we should just throw money at its/their problems. I can't imagine it being that expensive before the age of about seven, anyway.

Quote
How much of the current 4x expenses (ace work at 26/27!) is in ISAs rather than a SIPP? If you look at the likely growth of the ISA, versus your maybe-early retirement age, how does it compare and how does that make you feel?

About 10% is in a SIPP, 15% is in some managed fund my grandmother gave me, and about 75% is in an ISA. I do feel antsy about the SIPP.

MmatoO

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #14 on: September 20, 2017, 08:13:37 AM »
I do feel antsy about the SIPP.
May I ask why?

Playing with Fire UK

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #15 on: September 20, 2017, 10:11:18 AM »
I think the LISA is right for you.

I've seen my friends go through a "children are super expensive" phase followed by either "but I'm saving a fortune by going out less" or "but people give me so much free stuff" or occasionally "our baby needs three state-of-the-art prams and gold plated bottles." It seems to be part of the process. I'm excited for you both.

dashuk

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #16 on: April 25, 2018, 03:05:29 PM »
Pension is likely to beat the LISA if you're a higher rate taxpayer, have access to salary sacrifice or matching contributions, or are in receipt of tax credits. Otherwise LISA could well be better. Still worth having enough pension to use up your tax free allowance, though.

Putting money into a LISA rather than a normal ISA could be thought of as a gamble, as to whether you're going to need the money early or not. If you don't need the money before 60, then you win 25%. If you take it out early, then you effectively lose 6.25%. So, if you think you probably won't need the money early, then the odds are in your favour - but you do have the ability to take it out if the SHTF.

I know this is resurrecting an old thread, but just worked through @katekat 's journal and came across this 'losing 6.25%' notion.  While it is mathematically accurate, it only holds for a very unlikely circumstance (IMO).  Wanted to actually write this down to convince myself I was right or have someone point out my error.


So, you open a LISA and put £4000 into it (your 'stake').  The government puts in £1000 (their 'stake').  You immediately withdraw £5000.  The government takes £1250.  The amount of money you now have is 3750, 93.75% of your original stake, as per the quoted maths.

If you're less greedy, and only try and withdraw your stake rather than empty the entire LISA (rules only say "there is a 25% charge on withdrawal of cash or assets from a LISA", not "you must have all or nothing" as far as I can see), then the government will only claw back their stake, leaving you back where you started.

More realistically, lets say you fully fund a LISA for five years at the start of each tax year, the government bonus also turns up quickly, and you have it invested in index funds averaging a real 4% growth.  At the end of five years, your 'stake' is £20k, the government's is £5k, but you've actually got £28,165.  If you withdraw your original stake at the start of year 6, the government takes their 25%, you've still got £3165 left over.  You could actually withdraw £22,530, and the government take £5,632, which would put you back to around zero.  You've gained about 12.5% over this period.  You are exactly where you'd be if you'd made the same investment in a normal ISA.

You can't have the free money unless you meet the conditions (house or wait until 60).  But the calculation examples I've seen appear to assume that both you don't invest the money, and that the only way to withdraw money from a LISA is to take every last penny in the account.

What have I got wrong?

katekat

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #17 on: April 25, 2018, 03:26:21 PM »
So, you open a LISA and put £4000 into it (your 'stake').  The government puts in £1000 (their 'stake').  You immediately withdraw £5000.  The government takes £1250.  The amount of money you now have is 3750, 93.75% of your original stake, as per the quoted maths.

If you're less greedy, and only try and withdraw your stake rather than empty the entire LISA (rules only say "there is a 25% charge on withdrawal of cash or assets from a LISA", not "you must have all or nothing" as far as I can see), then the government will only claw back their stake, leaving you back where you started.
This is my understanding of this, happy to be corrected:

If you put in £4000, gov puts in £1000, and then you withdraw £4000, in my understanding that leaves you with:
£1000 still in the LISA, to be used at retirement or for a house, and £3000 (£4000 withdrawal minus 25% penalty) in-hand for whatever you chose to withdraw it for. That leaves you 'back where you started' in the sense that your assets are still £4000, but of course £1000 of that is not free for you to use as you see fit.

If you then withdraw £500 of your remaining £1000, you are left with:
£500 still in LISA, £3375 (£3000 previous withdrawal + £375 [£500 new withdrawal minus 25% penalty]) in-hand free of restrictions.

No matter 'how' (in what increments) you empty the account, the sums should end the same in this understanding. It seems the other understanding of how it applied is a bit weird -- it would be a weird feature to design a system in which you pay a different penalty depending on how much you withdraw.

I think the mathematical flaw in your example is trying to 'pay' the penalty with money you have itself not 'paid' the penalty on.
« Last Edit: April 25, 2018, 03:28:20 PM by katekat »

AnswerIs42

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #18 on: April 25, 2018, 04:14:21 PM »
More realistically, lets say you fully fund a LISA for five years at the start of each tax year, the government bonus also turns up quickly, and you have it invested in index funds averaging a real 4% growth.  At the end of five years, your 'stake' is £20k, the government's is £5k, but you've actually got £28,165.  If you withdraw your original stake at the start of year 6, the government takes their 25%, you've still got £3165 left over.  You could actually withdraw £22,530, and the government take £5,632, which would put you back to around zero.  You've gained about 12.5% over this period.  You are exactly where you'd be if you'd made the same investment in a normal ISA.

The penalty is 25% of the gross, not the net. If you want to withdraw an amount which will give you your original stake of £20k after the penalty has been paid, you'll have to withdraw £26666.67. You'll pay the penalty of 25% of £26666.67, which is £6666.67, leaving you with £20,000. You've then only got £1498.33 left in your LISA. Whichever way you slice it, you'll be losing 6.25%.

dashuk

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #19 on: April 26, 2018, 06:14:28 AM »
I don't think that's a mathematical flaw. It's a different interpretation of something which isn't clearly defined anywhere I can see. What is said could arguably be fulfilled by HL knocking 5k off the remaining LISA balance and handing it to the government. Or, yes, they could insist it's paid outside the LISA.

I think that's a fairly dishonest interpretation of the words 25% charge, but accept it's probably reasonable to be conservative in something ill defined and at the whim of the government to change anyway.

But, having 21497 (20k out, 1497 in) rather than 22530 that you'd have for same investment in a regular ISA, that's only a 4.6% loss, not 6.3%. Yes the 1497 is still inaccessible, but you've satisfied a hypothetical burning requirement for 20k before you turn 60.

Imagining the same 5yr input, then ignoring it for another five years before the desperate need for 20k rears its head, I think you come out ahead. Regular ISA would have 7414 left after withdrawing 20k, LISA would have 7599 left after withdrawing 26667.

Also, if your urgent cash need is only 10k, (so 13333 hit to LISA) you're well up even after 5 years.

It appears to me you can only realise the loss relative to a regular ISA if you withdraw pretty much all of it after a pretty short elapsed time. In that case, sure, you shouldn't be putting money in a LISA.

My situation now (35yo), and probably a typical one here, is deciding on a savings split between the two. More in LISA makes a massive positive difference to NW and income aged 60+, but pushes out FI date a bit to avoid risking cashflow issue in late 50s if treating LISA as sacrosanct and drawing down ISA to near empty.

My LISA timeframe is maybe 5 more years of maxing it, nearly 20 years of ignoring it (at some point during which I could RE), and then a small risk of having to pull a year or two's barebone expenses out if the ISA savings don't perform/last as well as projected to take me to LISA/SIPP access age. This would be a pretty small portion of the LISA total by that point.

I'd not plan for that, but knowing you'd still be ahead in that situation is a good confidence boost for avoiding one-more-year syndrome.
« Last Edit: April 26, 2018, 06:16:34 AM by dashuk »

londonstache

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #20 on: April 26, 2018, 10:25:47 AM »

26 and 27
He works and thinks he wants to keep on working “forever”. This may well be true, but things they are a-changing. Gets a full pension at 68. Gets a house with his job so we won’t be buying (or renting) until he retires.

I think this is easy to say in your 20s, from what MMM has said and I've heard from others, projecting after 5-6 years in the workforce that you are happy to continue for 41-42 years extra seems to be a big decision to take. Even if work continues to be a joy, and I sincerely hopes that it does, being FI is a worthy goal even if you don't RE.

Quote
I’m freelance and a low earner but we’ve recently found out I’m pregnant (due in April) so am planning to be a SAHM for a while (couple of years?) and then see how I feel/what seems feasible.

Hearty congratulations!

Quote
Currently have 4x annual expenses saved (mostly in normal ISA, small amount in my SIPP). The deal used to be that we mostly spent his income and saved mine, but if I’m not working then we’re looking at saving around £4000/yr, but my grandmother also sends us the occasional cheque/envelope full of used fivers, so we’d max out his LISA from regular deposits and then contribute excess to mine.

Goals:
1. Prepare for conventional retirement.
2. Prepare for the possibility that my husband decides his job has changed too much and he wants to quit.
3. Prepare for children. (Husband is very anxious about this. I am not.)
4. Prepare for an earlier retirement if possible.
5. Possible future purchase of an investment property (NOT a first home).

Is there any reason I should be concerned about our future savings being locked in a LISA? Is the risk great enough to miss out on the bonus? I’m inclined to the view that we have enough normal ISA savings now that we could spend if we needed to, but I think my husband is a bit antsy, and it does well to check because whatever we decide now will be the default until big things change.

I think that this depends on a few factors, and so my advice would be:

  • What % of the total ISA allowance (£40k between 2) will be used for LISA?
  • How early would RE possibly be?
  • What income sources would you have between RE and LISA access?

At the moment we are in the very fortunate position to be able to contribute the full £40k between two to our ISAs, making the LISA component only 20% of the total, which I'm comfortable with. I'd start to feel uncomfortable if this nudged up beyond 25-30% of our total annual investment due to the access restrictions, as it does restrict RE. Your situation differs somewhat as we have already bought property (and so the LISA can only be a retirement vehicle).

I'm looking at a RE glide-path as follows:

1. RE: funded by S&S ISA and taxable investment accounts, plus any additional income sources. Ideally no capital draw-down.
2. Retire semi-early (probably 60): Funded by personal pension + LISA, as well as above
3. Retire normal (probably 70): All of the above plus state pension.

Worth thinking through your situation carefully and weighing up the factors. FWIW I think FI is a worthy goal in itself - RE is optional, but it's a damn good option to have.

katekat

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #21 on: April 26, 2018, 01:51:51 PM »
I don't think that's a mathematical flaw. It's a different interpretation of something which isn't clearly defined anywhere I can see.

What is said could arguably be fulfilled by HL knocking 5k off the remaining LISA balance and handing it to the government. Or, yes, they could insist it's paid outside the LISA.

I think that's a fairly dishonest interpretation of the words 25% charge, but accept it's probably reasonable to be conservative in something ill defined and at the whim of the government to change anyway.
So when I said 'mathematical flaw' I didn't really mean that your maths didn't work, but just that it probably wasn't the maths used. I had seen enough reputable articles describing the 6.25% penalty that I assumed they were describing a real government implementation, and so whatever maths was used should be consistent with that, and so the maths you used probably wasn't how it was implemented.
But admittedly that's lazy and I probably should have looked for the actual source so I've had a poke around:

Quote
The withdrawal charge is 25% of the total amount withdrawn from an account. This is deducted from the withdrawn amount by the ISA manager at the time that the withdrawal is made.
(my bold, and you'll have to scroll a bit)
https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#with-dr
and this with examples:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/695324/worked_examples_of_withdrawal_charges.pdf

But, having 21497 (20k out, 1497 in) rather than 22530 that you'd have for same investment in a regular ISA, that's only a 4.6% loss, not 6.3%. Yes the 1497 is still inaccessible, but you've satisfied a hypothetical burning requirement for 20k before you turn 60.

Imagining the same 5yr input, then ignoring it for another five years before the desperate need for 20k rears its head, I think you come out ahead. Regular ISA would have 7414 left after withdrawing 20k, LISA would have 7599 left after withdrawing 26667.

Also, if your urgent cash need is only 10k, (so 13333 hit to LISA) you're well up even after 5 years.

It appears to me you can only realise the loss relative to a regular ISA if you withdraw pretty much all of it after a pretty short elapsed time. In that case, sure, you shouldn't be putting money in a LISA.

You always realise a 6.25% loss on the money you need to irregularly withdraw, but don't realise any loss on the money you kepp in the LISA. Given that, if you make a partial withdrawal but still keep the rest in a LISA for its intended purpose, you can indeed be very much ahead of not ever having put the original amount into a LISA.

The hypothetical situation that you're losing out to, here, is not the one where you don't put any of that original cash into a LISA, but the one where you predict your future needs accurately, keeping in a LISA the money you will leave for house/retirement, and the money you want other access to in a non-LISA ISA. Compared to that scenario, you lose out by 6.25% of the amount you want to access for other purposes (not the total amount).

frugledoc

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #22 on: April 26, 2018, 02:22:23 PM »
LISA is a great deal, crazy not to open really

dashuk

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #23 on: April 26, 2018, 02:47:37 PM »
Thanks for the links, worked examples were just what I was trying and failing to find earlier. Consider that point well and truly conceded.

The hypothetical situation that you're losing out to, here, is not the one where you don't put any of that original cash into a LISA, but the one where you predict your future needs accurately, keeping in a LISA the money you will leave for house/retirement, and the money you want other access to in a non-LISA ISA. Compared to that scenario, you lose out by 6.25% of the amount you want to access for other purposes (not the total amount).

Can't argue with that from a maths point of view. Whether it's any use as a reference point. Seems highly likely that something is better than nothing.

Which of course turns out to be a point already made months ago...

Putting money into a LISA rather than a normal ISA could be thought of as a gamble, as to whether you're going to need the money early or not. If you don't need the money before 60, then you win 25%. If you take it out early, then you effectively lose 6.25%. So, if you think you probably won't need the money early, then the odds are in your favour - but you do have the ability to take it out if the SHTF.

...so yeah, sorry for dragging it round the loop again. It's helped me anyway.

katekat

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Re: Should we be concerned about locking up our savings in a LISA?
« Reply #24 on: April 27, 2018, 12:52:34 AM »
Thanks for the links, worked examples were just what I was trying and failing to find earlier. Consider that point well and truly conceded.

The hypothetical situation that you're losing out to, here, is not the one where you don't put any of that original cash into a LISA, but the one where you predict your future needs accurately, keeping in a LISA the money you will leave for house/retirement, and the money you want other access to in a non-LISA ISA. Compared to that scenario, you lose out by 6.25% of the amount you want to access for other purposes (not the total amount).

Can't argue with that from a maths point of view. Whether it's any use as a reference point. Seems highly likely that something is better than nothing.

Which of course turns out to be a point already made months ago...

Putting money into a LISA rather than a normal ISA could be thought of as a gamble, as to whether you're going to need the money early or not. If you don't need the money before 60, then you win 25%. If you take it out early, then you effectively lose 6.25%. So, if you think you probably won't need the money early, then the odds are in your favour - but you do have the ability to take it out if the SHTF.

...so yeah, sorry for dragging it round the loop again. It's helped me anyway.

I'm glad!