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Lifetime ISA - am I missing somthing
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Mick H
Posted: 24 February 2025 09:05:35(UTC)
#11

Joined: 21/01/2025(UTC)
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John Bleke;335598 wrote:
So if you don't fulfill the conditions then the government can take back more than what it contributed? How is that justified?


I wonder if they even understand it themselves. The exact wording on the government site regarding the 25% "tax" on withdrawal is...

"This recovers the government bonus you received on your original savings."

Either they don't realise that they are "over recovering", or if they do then I consider the wording on their website to be misleading.

The maths is pretty simple, 20% would recover the government bonus you received on your original savings (plus an equivalent share of any investment returns). 25% gives the government an additional 6.25%.
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Tony Peterson on 25/02/2025(UTC)
John Bleke
Posted: 24 February 2025 09:47:59(UTC)
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Joined: 06/03/2023(UTC)
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That is scandalous!
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Mick H on 25/02/2025(UTC)
SSJ
Posted: 25 February 2025 10:45:05(UTC)
#15

Joined: 13/09/2010(UTC)
Posts: 512
John Bleke;335605 wrote:
That is scandalous!

The top-up money from the government effectively becomes a loan if you don't use it for the intended purposes. If I were to loan you money for years on end, I would want a return. 25% of the top-up "loan", plus or minus investment returns, might work for me if I had enough customers to average things out, but I wouldn't settle for less.
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Mick H
Posted: 25 February 2025 11:51:09(UTC)
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Joined: 21/01/2025(UTC)
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A quick illustration of the point I am trying to make.

You put in £100, the government tops it up by 25%. You now have £125 invested in total (£100 is your money, £25 is the government's).

Say you have made no returns and want your money back, the government takes 25% of £125 = £31.25, you get back £93.75.

If they were to only take back 20%, they would take 20% of £125 = £25, and you would get back your original investment of £100.

In both scenarios the government also gets a proportional share of any returns that have been made on the investment.

I believe the wording on their website is misleading. "This recovers the government bonus you received on your original savings" is simply not correct. It would be correct if they took back 20%. In taking 25% they are taking some of your original investment as well as the government bonus you received.
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Tony Peterson on 25/02/2025(UTC), Spark on 28/02/2025(UTC)
Tony Peterson
Posted: 25 February 2025 12:14:01(UTC)
#18

Joined: 10/08/2009(UTC)
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Thanks are for a very revealing illustration of the appalling levels of innumeracy which infect every part of UK society. Including governance.

A reflection, sadly, on mathematical education in the UK- a service of which I was once part.

Not quite as serious, I think, as the levels of literacy, numeracy, and humanity of many contributors to these threads.
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Daniel B on 26/02/2025(UTC)
Wheresthejam .
Posted: 25 February 2025 12:32:16(UTC)
#3

Joined: 27/01/2025(UTC)
Posts: 54
Mick H;335230 wrote:


I think it's naughty of them not to make that clearer. The wording on their website suggests they are just taking back their contribution, when in reality they are taking a chunk of your investment as well.

https://www.gov.uk/lifetime-isa

"You’ll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason (also known as making an unauthorised withdrawal). This recovers the government bonus you received on your original savings."



From the link you provided, there is a clear example listed:-

Example 1
Assuming no growth, initial savings of £800 will earn a 25% government bonus of £200 and give you a pot of £1,000. If you wish to withdraw the entire pot, a 25% charge will apply to the full £1,000. You’ll have to pay a government withdrawal charge of £250. This will leave you with £750.

So yes, essentially, the government intends to rip you off if you withdraw for reasons not listed. Think carefully before opening the lisa.
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SSJ
Posted: 25 February 2025 12:48:00(UTC)
#17

Joined: 13/09/2010(UTC)
Posts: 512
Mick H;335706 wrote:
A quick illustration of the point I am trying to make.

You put in £100, the government tops it up by 25%. You now have £125 invested in total (£100 is your money, £25 is the government's).

Say you have made no returns and want your money back, the government takes 25% of £125 = £31.25, you get back £93.75.

If they were to only take back 20%, they would take 20% of £125 = £25, and you would get back your original investment of £100.

In both scenarios the government also gets a proportional share of any returns that have been made on the investment.

I believe the wording on their website is misleading. "This recovers the government bonus you received on your original savings" is simply not correct. It would be correct if they took back 20%. In taking 25% they are taking some of your original investment as well as the government bonus you received.

I understand both the maths and the English.
Their phrase is technically true - they do recover the bonus, but like their politician masters, they left out an extra fact! However, they also give an illustration of paying back the bonus for those who can't picture it from the 25% figure so I'm pretty sure they know the maths better than you originally did.

If you are prepared to loan out money on your terms then please let me know where I can sign up :)
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The Slow Hare
Posted: 25 February 2025 13:04:47(UTC)
#13

Joined: 23/12/2017(UTC)
Posts: 18
John Bleke;335599 wrote:
Anyway, aren't they being phased out? Which would mean of course that they would then start to offer derisory rates as banks lose interest.


I hope not, as am just starting to help my children in their early-to-mid 20s.

Thanks for your comment, as I was unware that back in January the Treasury Committee had instigated a review.

---

https://www.which.co.uk/news/art...for-a-house-aevEw6g6EHRJ

What will the Lisa review include?
The Treasury Committee is seeking views from industry experts and consumers on whether the Lisa is up to scratch in 2025. Changes it is considering include:

* raising the property purchase price limit
* ending the early withdrawal penalty
* increasing the £4,000 a year limit that savers can get a bonus on
* restricting the Lisa to those with no access to a workplace pension
* scrapping the Lisa completely.

---

Hopefully one or more of the first 3 options is more likely than the latter 2.
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