OneFamily is urging the government to remove the £4,000 transfer limit for customers who want to replace their Help to Buy ISA with a Lifetime ISA. Research amongst existing Help to Buy ISA customers show that, now it is only months away from closing to new business[i], over a third (34%) want to move their savings into its improved long-term replacement, the Lifetime ISA.
The Help to Buy ISA launched in December 2015 and if customers have saved the full amount, they would now have £9,400[i] in their account, plus interest. However, the government will only allow customers to transfer £4,000 per year into the Lifetime ISA.
The Lifetime ISA opened in April 2018 and 250,000 people have opened an account to take advantage of the generous government bonus of up to £1,000 per year.
Nici Audhlam-Gardiner, Managing Director of OneFamily’s Lifetime ISA comments,
“By not allowing Help to Buy ISA customers to transfer their full savings into the Lifetime ISA, the government is holding customers back from making the most of the greater benefits and flexibility available on the new product.
“Our research shows that customers want to transfer, with one in three (34%) saying they would transfer their money into a Lifetime ISA if they could transfer the full amount. With the transfer cap at £4,000, savers who have the maximum invested could move gradually over a three-year period, however (29%) of Help to Buy ISA customers also said they don’t want to have to manage two accounts simultaneously[ii].
“The Help to Buy ISA was always designed to be a short-term product, whereas the Lifetime ISA means young people are not only saving towards that all important first home purchase but can keep the account open and give their retirement savings a much-needed boost too. Additionally, the Lifetime ISA can be used, its entirety, for a first-time home deposit, whereas the Help to Buy ISA bonus can only be claimed on completion of a first home purchase.”
The main differences between the two ISAs are:
|
Benefit |
Lifetime ISA
|
Help to Buy ISA |
|
Maximum yearly contribution
|
£4,000 |
£2,400 (£3,400 in year one) |
|
Government 25% bonus |
Paid monthly, up to £1,000 a tax year |
Paid upon completion of house purchase |
|
Payments in |
Up to £4000 per tax year, monthly, in one go, or as and when savers want |
A maximum of £200 per month can be added (£1200 in the first month) |
|
Type of saving |
Stocks and shares or cash |
Cash |
|
Maximum property price |
Up to £450,000 |
Up to £250,000 (£450,000 in London) |
|
Maximum bonus |
£32,000 |
£3000 |
|
Accessing the money |
Needs to be open for 12 months before a withdrawal |
Once £1600 is saved (three months full allowance) |
|
Uses |
Home and mortgage deposit, can be kept open to save for retirement, up to the age of 60 |
Mortgage deposit |
To find out more about OneFamily Lifetime ISA visit: onefamily.com/lifetime-isa
[i] 30 November 2019
[i] Account open Dec 1, 2015, first month £1200, Jan – Dec 2016 £2400, Jan – Dec 2017 £2400, Jan – Dec 2018 £2400, Jan – May £1000 = £9400
[ii] OneFamily, first-time buyer research April 2019