LISA - am I getting greedy?

[guitarplayer]

For those who don't know, LISA stands for a 'Lifetime Individual Savings Account' and is a tax sheltered investment platform in the UK. £4000 can be deposited annually which is then topped up with 25% by the Gov (it takes 2-4 weeks for the extra £1000 to arrive). This money can be withdrawn only after turning 60yo. The money can be also used as a deposit for one's first residential property. If withdrawn before 60yo and not for a deposit, there is a penalty of 6.25%. DW and I feel that we might be getting a property sometime in the next ten years.

Am I too greedy to want to make this money 'work' before we use it? 5-10 years is a pretty short time horison. Should I be just happy with the whooping 25% ROI in the first year of depositing each new pound? What if we change our minds and never want to purchase a residential property?

Another way of looking at it is that it is sort of like a tax relief when contributing to a pension plan, with the caveat that it can be used for residential property. We are two people so have a potential of turning £8,000 into £10,000 with no risk every year this way.

Thanks for all the advises!

[ThriftyRob]

My DS and DD (in their 20s) looked at LISAs and concluded that the conditions are too restrictive for them. DS invested in a Vanguard index tracker inside an ISA wrapper. Your appetite for risk/reward may be different. I'd also suggest you do more reading around buying vs renting.

[guitarplayer]

@Thrifty Rob, thanks for the comment. True, LISAs conditions are quite restrictive. I particularly don't like the fact that the money can be used only for a deposit, so there is a need for a mortgage. I foresee that this can be loopholed by taking a very small mortgage and paying it off quickly, although inevitably there would be some costs associated with the whole process of setting up a mortgage.

Yes, so one way of making the money work would be to invest in a Vanguard index tracker inside the LISA wrapper - ergo investing 125% of the principal to begin with.

I have been reading around buying vs renting for some time now and still have not decided whether to ever own a property. If I (we) decide not to buy, then the LISA will work essentially like a SIPP, with a possibility of withdrawal at 60yo instead of 55yo. But in such case, I would like to have the money 'working' rather than just cash sitting there.