I printed a statement this week, an actual piece of paper, because the figure at the bottom is £18,940 and I wanted to hold it. That's my Lifetime ISA, and it's the reason we can afford a deposit at all. I opened it in March 2019, a few days after my 24th birthday, because a woman at the accountancy firm where I worked then said in the kitchen that she'd bought her flat with hers, and I couldn't stop thinking about it for the rest of the afternoon.
How it adds up
The rules, as they were when I opened it, were simple. You can pay in up to £4,000 a year, and the government adds 25% on top as a bonus, so the most free money you can collect is £1,000 a year. Mine went in by standing order on payday. Over five years and eight months I paid in £14,480, which averages out at about £213 a month, though some months were £400 and a couple of lean ones were nothing.
The bonus came to £3,620, which is a quarter of what I paid in. I'd like to say I understood the maths along the way, but I mostly just watched it appear every month like a small, reliable ghost. The account is a cash one, so it earned interest too, about £840 in all. That's a decent weekend away, though next to the bonus it's a rounding error. Add the three together and you get the number on my printed page.
The rules we had to follow
Our deposit is 10% of £187,500, which is £18,750, so on paper the ISA covers it with £190 to spare. Getting the money there isn't a matter of moving it between accounts, though. These are the conditions that applied to us, at the time:
- The house had to cost £450,000 or less, which was never going to be our problem.
- The account had to have been open for at least 12 months, and mine had been open for more than five years.
- The money doesn't come to us. Our conveyancer requests it from the provider and it goes straight to them.
- The purchase has to complete within 90 days of the withdrawal, or the money goes back.
The bit that has my attention is the 90 days. We haven't asked for the money yet, and we can't sensibly do it until there's a completion date, because the clock starts when the money leaves the account. Our conveyancer says the request goes in early in January, once exchange is close, and the provider takes a little while to process it. The conveyancer charges a fee for handling it, which I'll add up properly when the bills are all in. Until then the money sits there, earning a few pennies a day and looking at me.
Matt, and the 25%
Matt never opened one. He's 31, so he still can (you have to open one before you turn 40), but it doesn't help with this house. What he has is £9,200 in ordinary savings, which is a perfectly good £9,200, and he's annoyed with himself in the quiet, practical way he gets annoyed with a drawer that sticks. He worked out that five years at the maximum would have been £5,000 of free money, wrote the sum on the back of an envelope, and put the envelope in the recycling. He says he's going to look into it. He's been saying that since 2019.
One thing I want to say plainly, because it surprised me when I read the small print. If you take the money out for anything other than a first home (or because you're 60 or over, or terminally ill), there's a 25% charge on what you withdraw. That's a quarter of the whole balance, bonus and interest included, which means you come out with less than you paid in. It isn't a reason to avoid one. It's just that the account is only free money when it's used for the thing it exists for, and the rules may well have moved on by the time you read this, so check them with the provider.
The statement is now in a plastic wallet in the folder marked "house", next to the passports. I'll write again when the money has actually moved.
