ISA warning: Your transfers may be limited – take note of this before taking action
Help to Buy ISA holders can utilise the money held within the accounts to help buy a first home. These accounts were designed to provide bonuses to people looking to get on the housing market but they are no longer open to new savers.
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The Help to Buy ISA scheme was closed to new customers on November 30 2019.
Lifetime ISAs (LISA) were launched to replace Help to Buy ISAs and they can provide more generous bonuses.
LISAs can also be used to help with retirement and while they do have some drawbacks, they’re generally considered to be better options than Help to buy accounts.
Help to Buy ISAs can still be held and invested into but due to their time-frame, many people have been encouraged to transfer the money held within them to LISAs.
As it stands, Help to Buy ISAs can have money saved into them until November 30 2029.
The bonus they offer can be claimed up until December 1 2030.
Because of these time-limits and the limitations of their bonuses when compared to LISAs, many savers may look to move their money across.
They will be able to move their money from a Help to Buy ISA to a LISA with few restraints but people with a lot of cash held within their accounts should be weary.
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LISAs currently have an annual limit of £4,000.
This means that Help to Buy ISA holders with more than this in their accounts will not be able to transfer it all in one go.
The bonus element of Help to Buy ISAs will be protected as the transferred funds will qualify for LISA bonuses instead.
There are some key differences between the bonus rules for both account types.
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Under help to buy, the maximum bonus that can be awarded is £3,000, regardless of how much money is saved within the account.
In a LISA, the maximum that can be gained is £32,000 (assuming full utilisation of the account.)
LISAs also have their bonuses applied monthly whereas for Help to Buy ISAs the bonus is only given when buying the home.
On top of this, LISAs can provide a bonus for retirement savings if the holder does not wish to use it for a house.
If the saver wishes (or may need to) withdraw money from their ISAs they should think carefully about which account to use.
Help to Buy ISAs currently have no withdrawal penalty in place.
For LISAs, 20 percent will be charged on any premature withdrawals and this charge was recently lowered from 25 percent.
For anyone unsure of what to do, free and impartial advice can be sought from organisations such as Citizens Advice, the Money Advice Service and the Money and Pensions Service.
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