Everything you need to know about ISAs (Cash & Shares) - but were too afraid to ask!

23:55If you are doing it to jemmy the system and you're effectively going to use your extra£8 ,000 allowance that you get on shares to hold cash in a shares ISA, that's what the government's trying to stop. So my suspicion is there will be a consultation on exactly how they do it and how long you have to be holding cash for it to be taxed and what the tax will be. But we're not there yet. We just don't know the rules to that yet. OK. Pete Hawkins. Until now, we had the freedom to transfer money between cash and stocks and shares ISAs in either direction. From 2027, we can't move from stocks and shares to cash to avoid a loophole on the cash 12k limit, which is what we've been talking about.

24:35Will this restriction apply to money already in stocks and shares ISAs, limiting my options to de-risk to cash, or will it only apply to money put in after 2027? So that is all quite correct. this is the other loophole they're trying to crack down on. So at the moment, you can simply move money to a shares ISA. So what people were thinking, if they wanted a cash ISA in 2027 with all 20 grand in, is they'd put 20 grand in a shares ISA, then the next day transfer it into a cash ISA. The government has thought of that. And they're using quite a serious hammer to try and stop that happening, in that they are going to stop anyone transferring money from a shares ISA to a cash ISA.

25:14And it's any money. It's not just money put in from 2027 onwards. From the 6th of April 2027, as far as we know, and give me some wriggle room because the full guidance is not published. We just don't know what they're doing. But as far as we know, if you have money in a shares ISA, you will not, and you're under 65, you will not be able to transfer any of it, even if it's from past years into a cash ISA. So if you wanted to do that, and there could be many reasons for doing that, you're going to buy a house in the next few months and you want to liquidate the assets so you're not at risk, then you need to do it by 5th April 2027.

25:53Tara Jane Nicholson says, can I transfer my fixed-rate cash ISA to a stocks and shares ISA with another provider? If so, should I wait until the end of the fixed-rate term or transfer now? I'm receiving my interest monthly into my cash ISA. Current rate is 4.12 % until the end of May. Thank you. You're welcome, Tara Jett. Well, I can't tell you whether you should move from a cash asset into an investment asset. That's always going to be your choice. But if we talk about the practicalities of doing it, if you were to choose to do it, then fixed rate cash ISAs often have early exit penalties in which you will give up 90, 180 or 365 days worth of interest if you take money out, either by transferring or withdrawing, before the end of the fix.

26:43So that is the most important thing that you check. And then you have to factor that into your equation. How big is the penalty? How important is it to you? You get the money into the different type of assets this quickly. So you can do it, but there could potentially be quite a sizeable interest penalty for doing so. The key to ISA is that you save tax. Correct. So starting with the stocks and shares ISA, what tax do they save you? OK, there are three taxes on investing. The first one is capital gains tax on profits. Now, that is simply when you sell something that is increased in value. So if you buy a fund for£10 ,000 and you sell it five years later for£20 ,000, if you're lucky and it's gone up that much, then you have made£10 ,000 profit and that£10 ,000 is subject to capital gains tax.

27:28Now, there is an annual exempt allowance of£3 ,000 per person per year. So you can make up to£3 ,000 of gains per year. But remember what we discussed, that the issue with selling investments is you might have held them for 10 years, but all the gain still crystallises in one tax year. It's not spread across the 10 years, if you see what I mean. Above the annual exempt allowance, basic rate taxpayers, so those who pay 20 % tax on their earnings, pay 18 % on capital gains and higher and top rate taxpayers pay 24 % on capital gains. There's also dividend tax because when you invest, some shares and funds pay you a dividend.

28:07That's income that you get each year. So it's not the capital growth. It's not the growth in the value of the share that you bought. There's a dividend allowance of£500 per person per tax year. That's on top of your normal personal allowance, the normal£12 ,570 a year. Most people can earn tax free each year. If you earn more than that, then the tax rates are lower on dividends and other forms of income. that 8.75 % for a basic rate taxpayer, 33.75 % for a higher rate taxpayer, 39.35 % for a top rate taxpayer. But the basic and higher rate ones are going up by two percentage points next April.

28:41And then there's also tax on savings because things like bonds or gilts, which are UK government bonds, they pay interest and they're tax-like savings. But any of that insider cash, insider shares ISA, you don't pay tax on. So let's just go back to that capital gains tax allowance. I said you make£3 ,000 per person per year. That's outside of an ISA. So if you sold shares within an ISA, there's no capital gains and it doesn't use up that£3 ,000. So you still have another£3 ,000 of gains you could make outside of an ISA on top of any gains you've made inside of the share ISA. Did that make sense, Adrian?

29:20That made sense. It did. Abdul Qadir Rahim, if I put money in a shares ISA, can I control which shares it is invested in? In the shares ISA, can money go down as well as up with share prices? Well, I would have thought so. Yeah, I mean, a shares ISA is just a tax wrapper. Investments can go down as well as up and have all the same risk as all types of normal investments. And the more you go for a specific... you buy one share, that's very, very high risk. You buy a fund of 100 shares, that minimises the risk. You buy mixes of shares and bonds, that's probably minimising the risk more. But when you minimise risk, you minimise the potential upside as well as minimising the potential downside.

30:00So this is all about establishing your own attitude to risks. And I would suggest that people go and do reading on that. But shares, ISAs, yeah, depending who you choose, I mean, you might choose a robo-investor that simply picks your investments for you. So you don't have a choice, or you might choose a typical investment provider where you just pick a fund and it tells you what funds to go in or you might go and go into one of the platforms where you can literally choose from tens of thousands of funds and shares and totally choose what you put in your shares ISA yourself because as I've said earlier, a shares ISA is just a way of investing inside a tax wrapper and the normal investment choices are still available within a shares ISA.

30:38OK, Avril Thurston, where is a good place to find a reputable Beginner's Guide to Setting Up Your Own DIY Stocks and Shares ISA, including the key things to look at when deciding on funds. DIY Stocks and Shares ISA, we've got to define that, haven't we? No, I mean, DIY just means that you're going to pick the stocks and shares yourself, or more likely for a beginner, you'll be talking about picking funds. I mean, let me be really plain. If you are a beginner investor, picking individual shares, that is a very high-risk game. What you're probably doing is picking funds, and these days people tend to go for passive funds.

31:13So an active fund is one where you're in, but there's a fund manager who is paid, so the charges tend to be higher, to pick funds for you to try and beat the markets, whereas a passive fund is one that tends to be computer-driven to try and just match the performance of an indices. So a classic index is the FTSE 100, that's the 100th biggest UK shares, or the S &P 500, that's 500 big shares in America, or a global tracker. and people tend, as a beginner, they buy a combination of index trackers, which have very low charges. So you're going to get back similar returns to the market. You would look at whether you need access to the cash or you can reinvest the dividends that compounds them because then if you get any dividends each year, so that means that's where you get an income payment and you reinvest it, that reinvestment then buys more shares and it sort of compounds because then you get dividends on the extra shares that you've got.

32:06So I mentioned earlier Boring Money and Triple I. I haven't looked at Rebel Finance that people are telling me is great on YouTube. I'm not vouching for it because I haven't looked at it, but lots of people have been saying that's very good as well. And it's one of the things on my list to check out. So I'll give them a name check, but I can't validate them at the moment. I haven't had the time to go and have a proper look. James Starbuck. Do you think he might be from the Starbucks family himself? Or was he in Battlestar Galactica? Wasn't that Starbuck as well? I haven't watched any of those films.

32:35I've never seen Star Trek, Star Wars, Battlestar Galactica. Or Buck Rogers. No. Carry on. Anyway. How much, James says, how much flexibility do you have in selecting and changing the investments in stocks and shares during the time you hold the ISA? Is it effectively the same as with investments outside of an ISA? Yes. Exactly the same. Depending on the platform you choose, exactly the same within an ISA. I mean, if you chose to, you could buy a fund one day, sell it the next day, buy another fund, sell it the next day. And it all stays within the ISA wrapper. and ISA is just a wrapper, just a tax wrapper.

33:07It doesn't change the innate what you're investing. Do you know, we were at a text console, so all the texts that are sent in, and for taste reasons, any lewd word is asterisked out. Okay. So, and it's a... Someone from Scumthorpe? No, no, no, I wouldn't go there if I was you, but I'm afraid Stopcock is not passing the test. Oh, no. It's just stop. Do you know, we used to, in my weekly email years ago, the spam checkers would never let us have stop cot for exactly the same reason. So I always used to write it and it always made me laugh. I'd call it a stop mail chicken. Yeah, and why not? It says, hi, Adrian, every water meter has a stop cot next to it.

33:54So all those people with a water meter just need to look there. Cheers, says Alan. Is that true? I'm going to believe Alan. I certainly said there's a level of common sense. It might be an outdoor water meter that you can go and switch it. There might be an indoor one as well. So just check which is more convenient for you. OK. Now then, where were we? Should we move to cash ices? Yes. What tax do they save you? OK, so when you savings aren't taxed, but the interest on savings is tax. But one of the things to remember about savings, you actually have quite a lot of allowances even before we get to ices.

34:30So you've got your personal allowance, the£12 ,570 a year. Most people can learn from any source, whether it's from work or from savings interest or rent on a property that you've got tax free. Then above that for savers, if you have limited earnings, so limited work earnings, and you earn under£18 ,570, there's a thing called the starting rate of savings where you could potentially get up to another£5 ,000 of interest from savings tax free. For those who earn more than that, there's the£1 ,000 a year personal savings allowance, which is the amount of money you can earn from any form of interest each year without paying tax on it.

35:12If you're a high rate taxpayer, that's 500 quid. If you're a top 45 % rate taxpayer earning over£125 ,000, you don't get one of those. So you've got all of those allowances. Now, the important thing to understand about cash ISAs is not only is your interest not taxable, It's tax-free, any money in a tax, but it doesn't count towards those allowances. So to make it simple, when I say you can put£1 ,000 in the personal savings allowance, you can have£1 ,000 of interest because of the personal savings allowance each year. That's on top of any interest in an ISA. Interest in an ISA simply is not taxable.

35:46It doesn't count to any of those limits. So it's a sort of bonus additional extra. Premium bonds, which you can have£50 ,000 and work in a similar way. So the tax you're saving in an ISA, in a cash ISA, is for those people who would otherwise be paying tax on their savings. So that would tend to mean you're earning as a basic rate taxpayer over£1 ,000 of interest a year. Top savings account's 4.5 % at the moment, so you probably need, what,£22 ,000 in that for it to work. So the cash ice is saving you tax if you've already earning quite a bit of interest elsewhere. OK. I've got a text moment. Simon, the meter reader here.

36:23Alan is correct. Stop male chicken is at the water meter. Nice. So there we go. Anyone who's got a water meter, we've got confirmation. That will be a place to find your stopcock. But if you don't have a water meter, which many people still don't, and certainly not in Scotland and Northern Ireland, where they tend to be less common, then you might want to be looking somewhere else too. If a working person has£12 ,000 cash to spare and save in a cash ISA every year, then what would be the total value in five and ten years respectively assuming a constant 4 % tax-free interest rate? Am I doing a Massey level?

37:03Yeah. This is your mastermind, is it? So go on and go. They're putting£12 ,000 in a cashiser each year at 4 % interest and you want to know over five or ten years and I haven't, well I could go on my phone on the calculator but it wouldn't be good radio. Let me try and do it off the top of my head then. OK, so after five years with£12 ,000, you'd have a total of£60 ,000 saved. Your interest rate is 4%, but you wouldn't have had the£60 ,000 in for five years. So we'll take an average balance of£30 ,000. So your average balance was£30 ,000. 4 % interest on£30 ,000 would be£1 ,200 a year. £1 ,200 over five years means£6 ,000 of interest, but there would be compounding too.

37:42So just I'm going to add another grand on top. My guess would be if you did that, if you put£12 ,000 in a year, then you would have£67 ,000 in roughly after five years. And after 10 years, then it'd be£60 ,000 and it'd be£2 ,400 a year. OK, so you'd have£7 ,500 up then after five years. I think you're going to be somewhere around£30 ,000 up after 10 years. So you'd have£67 ,000 after five years and£150 ,000-ish after 10 years. If there's anyone out there who wants to work that out for me properly, using proper compound interest and to the power of, to work out what it would be, and let's see how close it was.

38:21So I'm saying 67 ,000 after five years and 150 ,000-ish after 10 years. I'm sure someone will do that on there, sitting on the computer and sort that out for us. But I've got a radio show and a podcast to do. By the magic of podcasts, just as we finish recording, my brilliant researcher Rosie has done those numbers for me. And she says, having done it properly on a spreadsheet, that if you invested£12 ,000 at the start of each tax year for five years at a 4 % interest rate, I'd estimated you'd have a total of£67 ,000. Well, she's telling me the exact answer is£67 ,596. And if you did it over 10 years, then I'd estimated£150 ,000.

38:59And I apologise for being so far out because the actual answer was£149 ,836. Do you know what? I'm taking both those as a win. Let's carry on with the pod. OK, how does the process of transferring work? Do offered rates include transfers? And we need to leave a bit of time for Tellers here because some of them are really good. So how does transferring work? You open up a new ISA and you don't have to put any more money in it and you simply say, here are my old ISAs, please move the money across. And very importantly, that does not use up your£20 ,000 limit and there is no time period. You have to do it in the tax year.

39:40You can transfer a nicer at any time and it isn't using up your£20 ,000. As for the rates, I presume that means it's a cash ISA question. Well, on cash ISAs, many of the top rates either don't allow transfers or don't give the newbie ISAs to transfers. From the top of my head, the top paying easy access cash ISAs allows transfers is Charter Savings Bank at 4.16 % at the moment. The top paying for new cash is easy access is trading 212 at 4.52%. But you don't get that rate if you're transferring across. Do you want to do a tell us? Yeah. I wanted to know your people's cheap or no cost ways of having just a little bit of Christmas magic.

40:24There's some lovely ones here. Sarah Milton at the dinner table at Christmas. We pass around a plain bauble and get everyone to sign it. Then we write the year and put it on the tree. I've just put up my tree and I love reading baubles from years gone by. I love that. That's beautiful, isn't it? Blobby. Toilet paper is cheaper than tinsel and after being wrapped around a tree, can still be used for its intended purpose. Don't try and do that in reverse. And it'll have a pine scent. Yeah, check for the needles. Yeah, and Secret Santa for the family. Massively slashed my present fund. One gift, job done.

40:56Also saves everyone being given token gifts that end up in the charity shop. The Reverend Philip. I think we know where this one's going. so many churches put on some really professional standard services that are very accessible to those who don't usually go to church. Castle Church here in Stafford, good plug for Reverend Philip, puts on an amazing interactive Christmas Eve service with giant screens, superb light show and live band, all for free. Jill Towers, you can recreate the sound of walking on freshly fallen snow by sellotaping Rice Krispies to the sobs of the shoes. Well, I love that.

41:29It only works for two steps. Left foot, right foot, and then all the crispies are crushed. It feels like a copy of Viz, doesn't it? Yvette Jones, I live on my own, cannot face the palaver or high-crossed of an Xmas lunch. It's pigs in blankets, Christmas pud and cream, fireside with a cat and decent film for me. And worth remembering always that Christmas, while a wonderful time for many, is for those who are having grief-filled times and disappointing times or struggles, can actually be a really difficult day. So I wish everyone in that particular situation, I hope you get through it with less problems than you think and more smiles than you'd expected.

42:12Hello, welcome to Money Mastermind, where I give Adrian a three option multiple choice question. And 14 times he's got it right and 27 times he's got it wrong, which is good, Adrian, because it means you are. are... B-R-C. Currently still better than random chance. Well done. Feels good. But if you get this wrong, you go to NBRC. Just telling you. It's a warning. Lots of pressure. Anyway, the question. They say the car reflects the man. Well, Adrian is proudly driving a 1998 beige Vauxhall Cavalier, 1.2 litres of pure modesty. It's been lovingly modified with an enthusiasm dampener to keep things at a suitably chillsy and pace.

42:56When I was a teenager, my friends used to mock me. Mock me savagely. And say my ideal car the ideal car for me was a brown Maxi. That's quite close, isn't it? It is quite close. Chocolate brown rather than beige. And now you are at this stage and you're still being mocked in the same way, but this time with love. Yes. Recently, Adrian got his car insurance renewal for the beige bullet. Thankfully, having listened, he didn't auto-renew. Instead, He went to a brand new comparison site aimed squarely at his demographic called mildly but persistently perplexed.co.uk. Yeah. Which, within the quotes, he spotted a substantially cheaper quote than his renewal from his existing insurance for exactly the same policy.

43:44You with me? Yes. So, Adrian, in that case, which of these can you legally require your existing insurer to do? Legally require. Legally require. A. Renew at the higher price, then demand a refund of the difference because the law says existing customers must be given the same price as new ones. B. Insist the insurer lowers your renewal to match the comparison site price because the law says existing customers must be given the same price as new ones. Or C. Nothing. They are allowed to charge you a different price to what a new customer gets. So you went on a comparison site, a new one, mildly but persistently perplexed.co.uk.

44:26You saw a substantially cheaper quote for your existing insurance, exactly the same policy. Can you enforce them to renew at a higher price, but then get a refund of the difference? Or do you simply say you have to match the price on the comparison site? I'm going direct to you or you don't have any legal rights. if I've got legal rights to do that I wonder when they were brought in would that be a competitions authority or insurance ombudsman it feels if it were brought in it would have been brought in by the regulator the FCA just to say I mean it seems it seems unlikely to me that you've got any legal right but I'm

45:17And if you do, do you... You were saying the first one, A. A is you renew and get the difference back. And B is you renew at the cheaper rate. But both of those are that there is a law that says existing customers must be given the same price as new ones. And C is you don't have the rights. OK. I think you do have... I think it's B. You think it's B? B, yeah. OK. So, a few years ago, there was a law brought in to stop what was called the loyalty penalty, which is where existing customers pay more than new customers for renewing their car insurance. And so what that is meant to do is to say that existing customers must be given the same price as new ones.

45:58So, Adrian, you would assume the answer is A or B, correct? Yes. But it isn't. The answer is C. Play the uh-uh. The answer is C. You don't have any legal rights. I get a lot of questions about this. People get very angry when they see a renewal cheaper. The rule is medium specific. So what that means is you, an existing customer, cannot be charged more than the new customer who is getting their policy the same way. And it is absolutely specific. So it depends. You cannot be charged more than the customer going on the same comparison site you went to, not going on any comparison site, going on the same comparison site.

46:41Now, you'll remember in this question, you went to a brand new comparison site, mildly but persistently perplexed.co.uk. And the reason I put in brand new is that means you, by definition, did not originally get your policy through that comparison site because that comparison site is new. And therefore, because you are not going through exactly the same system, you do not have a legal right to demand that as an existing customer, you get the same price as a new customer. Now, what I would suggest you do is you just go and get that policy as a new customer and you sign up in that way. But in terms of the law, many people get in touch with me and say, I thought they'd stop this.

47:15I thought they'd stop this price walking that they put the price up every year. So as existing customers don't pay more and we could rely on just renewing, but you can't because it's product specific. And then they can go each year and say, well, we're going to be cheap on this comparison sites, but not on that. We'll just be the same price as direct. Or we can offer, you know, exclusive deals here and there. There are ways around it, which is why when it comes to your car and home insurance renewal, both of which where the new law to penalty rule applies, don't let that give you a false sense of security that you're getting a good deal.

47:44Your existing policy may still be a pants price and you might be able to get it cheaper elsewhere. But in practice, you should be able to get that price. In practice, but legally they could say, sorry, we're not accepting existing customers on that comparison site. But I mean often you will be able to do it. Absolutely right, yeah. And we're saying that both car and home insurance prices are down this year. So if you get your renewal and it's the same price as last year, don't sit there thinking, great, I don't have to do anything. You might be able to save 10 % or 15 % by doing a wide comparison of the market.

48:12OK, so I'm now bang average. You are now no better than Random Chance and we'll be playing that next week.

48:21OK, we're now into the pod only bit and I've got podcast producer Matt with me. Hello, Matt. Hello. Now, I know we've got lots of questions left on lifetime ISAs and the help to buy ISAs, but let me, before we get to your questions, let me just do a quick introduction of what a Lifetime Iser is. So a Lifetime Iser is a specific product that you can only open if you're between age 18 and 40. So you can open it until the day before you are 40. Once you've opened it, though, it stays open. So you can continue to have it. And someone could have one up to the age of 48, I think, because they first started in 2017.

48:54So if you were 48 now, you might have opened one then and have a product. The big thing on it is that you get a boost of 25 % added by the state on contributions you put into it until the age 50. Now, you can put a maximum of£4 ,000 a year into a lifetime ISA. There are both cash lifetime ISAs and shares lifetime ISAs. And then the bonus you get added if you put the maximum£4 ,000, 25 % of that is the£1 ,000 added on top. So you put£4 ,000 in, you have£5 ,000 in. That bonus is then accessible if you are exchanging on a first-time home as a first-time buyer. Now, the definition of a first-time buyer is pretty strict.

49:35It is someone who has never owned or part-owned a home anywhere in the world before. So if you inherited a small share of a house when you were 20 and it was sold 10 weeks later, technically you don't count as a first-time buyer anymore. The other time the bonus is paid is if you withdraw it once you're age 60. So it's used towards retirement or older age savings if you like. One of the biggest problems on the lifetime ISA that I've been campaigning about is that the maximum property price you can use for an eligible house is£450 ,000. And that hasn't changed since 2017, even though house prices have gone up, which means some in London and the southeast of England are being priced out of the lifetime ISA.

50:13One quick important thing to know, you can only get the bonus if you've had the product open for a year. So you need to have the product open for a year to get the bonus. so my tip for anybody who might one day want one of these is open it with a quid now and then by the time you get around to using it you'll have already had it for a year so you no longer have that criteria so you could then put four thousand pounds in get a thousand pounds on top and use it to buy a first-time house straight away the biggest issue the biggest problem with the lifetime isa and the real reason i think it's outrageous that the 450 000 pounds hasn't increased is if you take your money out of a lifetime isa for any other reason than buying a qualifying first time home or once you're age 60 then you pay a withdrawal penalty and the withdrawal penalty you pay is 25 percent now you may be thinking they give you a 25 bonus and they take a 25 penalty you get back to where you are well it doesn't work like that because 20 25 is on a smaller number and 25 is off a bigger number what actually happens is it's an effective penalty of 6.25%.

51:18So if you had£10 ,000 in the lifetime ISA and you withdrew it for any other reason than a qualifying first-time property or retirement, you would only get£9 ,375 back. You'd have to pay the state a fine of£625. Now, I think that's outrageous, especially where I think it is outrageous is for those people who are buying a first-time house. So if you're buying a first-time house for£460 ,000, you've saved in a lifetime ISA for the right reason, then it's absolutely outrageous that you then have to pay a penalty to access the money you'd saved using it for the right reason because you've been priced out.

51:55My campaign has been to change the withdrawal penalty for those people buying a property above the qualifying limit as a first-timer, that they only pay a 20 % penalty, which basically means they don't get the bonus, but they get back the money they put in. I had hoped that would be in the budget. We've talked in the podcast about my hopes it would be in the budget. When I spoke to Rachel Reeves about it, she said it wasn't something she could do this time. And they have announced a consultation to replace the first time buyers, Lysa. And also within that, they will be looking at increasing the property threshold.

52:24So that, I'm afraid, has been deferred yet again. And I had similar conversations with Jeremy Hunt, who I thought was going to change this. But yet again, it has been deferred. So that is my warm up matt by the way the top savings uh cash uh license are money box plum and tembo all at substantially over four percent shares isis i probably wouldn't be using as a first-time buyer because you might want that money at any point but if you were using this for retirement where it tends to underperform a uh private pension for most employees anyway uh but if you're using it for retirement you'd probably then want to be looking at a shares lisa got it do you want some questions for some listeners okay lauren parkin if they kill off the lyser will they be keeping it open for people currently using it for retirement savings or will they have to transfer their savings into another retirement account and will they lose the bonus so that is a completely unknown question and i have asked the chancellor about it and she said this will all be in the consultation they do about the product to replace the lifetime isa so now what i'm going to do is is read between the lines and guess and it's important I go as solidly as I am guessing here.

53:37My suspicion is in a couple of years time there'll be a new first-time buyer product that's somewhere more like the old help to buy ISA than a lifetime ISA. It's only for first-time buyers, it won't be for retirement. I think they will close the lifetime ISA for new applicants but those who have a lifetime ISA will probably be able to continue to use it as it is towards retirement savings although we will I would expect to see the number of providers offering lifetime ISA shrink substantially so you will probably still be able to use it for retirement at that point but we are in a bit of a limbo period at the moment so I mean there is a question up to you a legitimate one that says should you be putting money in now or waiting to see and that's something only you can decide.

54:24As a really slightly askance point, what I do find is interesting is if you are between 18 and 39 now and you've bought a house, so you would want a Lysa as a first-time buyer, I would also put a pound in a lifetime ISA now. Why? Well, because if they do close down the lifetime ISA to new applicants and turn the new thing into a first-time buyer's only one, and if at a later date a LISA does turn out to be good for retirement for you because you've used up your pension and you're self-employed and blah blah blah whatever then by putting a pound in you might be able to keep the facility and put more in later I'm not saying you will or you won't but it's only a pound so it's not a big risk but just to give you the opportunity of that facility may well be worth having anyway so sorry Laura I can't give you a firm answer that's because no firm answer exists okay one from James I have a LISA but with the upcoming consultation Is there any point in continuing to invest in it?

55:18Do you think we'll be able to use it for our first home or will it be locked up until I'm retired? If a new scheme is implemented, will the Lysa be transferable or withdrawable without charges? So, it is my strong suspicion that if you're using it as a first-time buyer and you're buying a home less than£450 ,000 and that's what's likely to happen in the next couple of years, then this hasn't changed anything and you should continue to put your money in a lisa. I don't know that, but there's absolutely, you know, the Chancellor said to me, and there's a clip of me interviewing about this on my social media you can go and look at, you know, there is absolutely no change to lisas now and nobody should behave any differently on the back of it type thing.

55:57And I think certainly for first-time buyers, I think that's true. I mean, the key is the£450 ,000 property price. I have said to the Chancellor that I will be asking strongly that people with lifetime ISAs and help to buy ISAs, the predecessors of lifetime ISAs that you can still have now, but is closed to new applicants, should have the choice to be able to transfer all their money across into the new first-time buyer's product? Again, I haven't had an answer, but it's certainly something I would be submitting to the consultation. James, if you're saying to me, I'm putting money in, I think I'm going to use an ISA in the next two or three years as a first-time buyer on a qualifying property, should I continue?

56:32Well, if it was right for you before the budget, in the next two or three or four or five years, it's probably still right for you now as a first-time buyer. Similar one from Alex. I'll probably buy my first home in the next four to five years and have a Lysa. I live in the northwest and doubt my first home will be over 450 ,000, even in four and a half years time. So generally the Lysa works for me. Should I keep contributing to my Lysa to build my deposit or wait till there is more info on how it will change? So, again, I don't know, but my very strong guess would be keep going in your particular situation.

57:05You seem to have ticked all the boxes for the type of person who should be using a lifetime ISA. And I can't see, I think it would be really, you know, the worst case scenario is they decide to stop license for new entrants and they don't do a new product. But to penalise you for having money in a product that they supported, I mean, that goes against all firms of natural justice. I don't see it changing in a way that's negative for you. I mean, I can't guarantee it, but if I were in your position, I'd keep contributing to my lifetime ISA. And I think you may have already answered this, but Lisa Jane, my son's just turned 18.

57:36We planned for him to open a cash license to save for his first house. Is this still a good idea? Now concerned that he'll start to put into it and when they change, he'll need to withdraw it and pay the penalty. I think I have already answered it. I think, again, in those circumstances, as long as it's for the right reasons, and you understand that if your 18-year-old son wanted to take this money out for any other reason than buying a qualifying house, then he would pay a penalty on it. So if it was right before, it's probably still right now, is my answer. OK, Debbie, my daughter is 22 and is looking to open a LISA for retirement instead of starting a private pension.

58:10The best one seems to be online, but we're a bit nervous about doing one that's not a high street and we don't know where to start. Any advice on the best ones to go with is very much appreciated. There's a reason that high street banks don't offer the lifetime ISA. And that is primarily because they're scared of being done over mis-selling on the retirement element, not the first-time buyers element. So let's just be really playing for your daughter, Debbie. Generally, first of all, if she is an employee, then a pension is almost certainly a better idea than a lifetime ISA for her. Both because when you put money into a pension it's already tax efficient.

58:49The money comes from your pre-tax earnings. Money you put into a lifetime ISA comes from post-tax earnings. Let's go very plain on that. So you earn for every£100 as a basic rate taxpayer your daughter earns. If she puts it into a private pension then she will have£100 going into it. If she puts it in a pay packet, she'll have£8 national insurance and£20 tax, so she'll only take home£72. Now, if she puts it into a private pension, she'll still pay the national insurance, but that extra£20 of income tax that she would have paid is now being put into her pension. So that's the tax-efficient nature.

59:26In a lifetime ISA, the key to a lifetime ISA is you get the 25 % bonus, so it's sort of equivalent as a basic rate taxpayer. But if your daughter is employed and she goes through the auto-enrolment system that happens automatically even if you don't choose it, then you can contribute 5 % of your salary, assuming you're aged over, she's the right age, she's 22, so that's perfect, she's got to be 22 and over, and earning over£10 ,000, and the employer has to match it up to at least 3%. So now that£100 you put in, you're getting£60 from your employer. So it's costing you effectively, I'll ignore Nash Insurance, it's costing you£80 as a basic rate taxpayer and you're getting£160 in your pension.

1:00:05as a top as a higher rate taxpayer 40 percent is costing you 60 quid and you're getting 160 pounds in your pension if we look at this without the employer element let's say your daughter's self-employed because it does say private pension although employment pension would be more lucrative well then as a higher rate taxpayer she again is probably that the tax gains from a private pension would still likely outperform a lifetime isa but it is much closer and it's a very complicated one and I'm doing broad brush and you should do more readings on it. If she's a basic rate taxpayer, then a lifetime ISA and private pension tax sort of tends to balance itself out a bit more.

1:00:46And the LISA have the advantage that you don't pay tax when you take it out at the other end, but you would if you were to withdraw it before she was age 60. So there's lots of ifs and buts. Again, though, and you know, the truth is if you're talking for a private pension, I presume you're talking about a shares-based investment because it's over the long period, in which case you wouldn't really want to go for high street banks anyway. You'd want to go with the better investment platforms that are out there. And we've already talked about some of those that give you a nice wide choice with low charges.

1:01:15So hopefully I've sort of answered that question, though there is uncertainty about the lifetime ISA as a retirement vehicle because of this consultation that's coming. And a final one from Lynn. My kids opened. I helped to buy ISA when they were 16. I'm not sure they'll be ready to buy before they're 26. Will they lose the bonus of£3 ,000 if not used in the 10 years? Probably, yes. I haven't actually read the closing details. It's 2029 when the Help to Buy ISA closes. So the key to a Help to Buy ISA, the big difference between the Help to Buy ISA, the Lysa's predecessor, was three things. One, you could only buy a house worth up to£250 ,000 unless you're in London when it was£450 ,000.

1:01:54The lifetime ISA is£450 ,000. two the bonus on a help to buy isa you get when you complete whereas with a lifetime isa it's when you exchange which is better because it can then be used towards the deposit for a house whereas a help to buy isa can only be used as a deposit towards your mortgage because it comes later in the process and three you can withdraw your money from a help to buy isa whenever you like with there's no problem you don't get the bonus but there's no penalty which means it's much more flexible so the worst thing that happens is you've got a savings account it's in an isa it's tax-free, at the end of 10 years, if they haven't used it, they wouldn't get the bonus, but they would get back all the money they would put in plus interest with no penalty.

1:02:34So the risk isn't that high compared to keeping it in there. But, and there is a chance, and I'll certainly be lobbying for it, that the new first-time buyers ISA that comes up in this consultation may allow them to transfer their help to buy ISAs into it, and therefore will have a better longevity than just to help to buy ISA by itself. And I think, is that when we get to the end of ISAs? That's it. I realised there was one thing I didn't say, which I'll do as my final thought. I started this by saying, you know, your money is often nicer in an ISA. Well, certainly on shares ISAs, that tends to be the way because the fees tend to be similar, though you should always check.

1:03:14With a cash ISA, the one time it doesn't do as well is if you're not a taxpayer, So you are not earning more interest than your personal savings allowance, let's say, where you can earn£1 ,000 of interest a year without paying tax. On fixed rate ISAs especially, the rates are lower than normal fixed rate savings. So if you weren't going to pay tax on it anyway, because you're within your tax free allowances, then you can get higher interest rates outside of an ISA for fixed savings than you can inside an ISA. The advantage of fixed savings inside an ISA is you're always allowed to withdraw your money.

1:03:49though you have to pay an interest rate penalty, whereas outside of an ISA in normal savings, fixed rate savings, your money is locked away. But if you're planning to lock your money away for a set period and you won't be paying tax on it, then you are probably going to get a higher rate, about 0.2 percentage points higher by putting your money in normal fixed savings than the cash ISA. So the ISA wrapper is advantageous, but it still does always depend. And this is what I've hopefully got the point across by saying it's just a wrapper. It's what you put in the wrapper that really counts. Now you put in an investment that's a bad investment, you're going to lose money in a shares ISA.

1:04:22You put in a good investment, you're going to make money. You put in the best easy access savings accounts in a cash ISA, well it's going to perform well for you compared to in a normal savings account if you pay tax. But ultimately it's just a wrapper and it's what you put in the ISA, which cake you choose and where that cake's from and who's manufactured it and how they baked it and is it a good one. And are they charging you a lot of fees for making it? Probably stretching the analogy. Which cake you used, not the cling film, which is what really matters. And let's just finish off this pod with a few more of your tellers, ways that you can get Christmas magic.

1:04:55I've got Mrs Dolly here. Get a little. Other supermarkets are available, she says. Four pound amaryllis with a pot and compost. Give it to family members. Then have a race on whose will be the first to flower. I like that. I like that, but it's going to take a while. Yeah, but, you know, delayed gratification is good. that. True. Kevin wrapping the doorway in Christmas paper so the kids have to burst through it to get to their presents. I like that. I love that. You can just imagine that would be so cool. Christy a Christmas sing along. Have the children write out and decorate multiple copies of the lyrics to the 12 days of Christmas and have all the family sing.

1:05:29Remember to especially shout out five gold rings beautiful I shouldn't have done that. Natasha says we still took a postcard declaring the winner of our streets decorations through the door the family one is anonymous the scout pack one not at all and we all sign it oh that's nice that'll give one of your neighbors a big smile i'm sure and that is it that's it for this week hopefully you've understood how ice has works and you've got a little bit of extra magic for your christmas that's it for this week if you've enjoyed it please tell your friends you've been listening to the martin lewis podcast and why not subscribe then your pockets will be pleased with you we tend to put out a new episode every thursday and also on Mondays too in the form of the Question Time podcast where you can ask me questions on absolutely anything and everything within reason.

1:06:19And if you haven't enjoyed it, bye. I got meals, I got to pay, so I'm going to work, work, work, work, work, work. I got mouths, I got feet, so I'm going to make sure everybody eats. Martin Lewis is the founder of moneysavingexpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing martinlewispodcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.