In our weekly series, readers can email any questions about their finances to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot and has worked in financial services for 25 years. If you have a question for her, email us at money@inews.co.uk.
Question: I have a Lifetime ISA (LISA) but the property I am buying will be over the £450,000 price cap. So I transferred my LISA to a Stocks and Shares LISA. If I grow my money in this, am I effectively avoiding the withdrawal penalty of 25 per cent when I take my cash out?
Answer: Following last week’s question, where a reader found themselves potentially locked out of using their LISA for a home purchase, another reader got in touch to suggest an alternative approach.
Your savings in a LISA are topped up by a 25 per cent government bonus, but if you use the money before you’re 60 for any reason other than buying a first home under £450,000, you’re hit with a withdrawal charge.
Their idea is an interesting one. Rather than accepting the 25 per cent withdrawal charge, they suggested transferring from a cash LISA into a stocks and shares LISA and allowing the money to grow, in the hope that investment returns could offset the impact of the penalty over time.
