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Lifetime ISA – What It Means to Your Savings

What is a Lifetime Savings Account? Who is it for?

From April 2017 the government are introducing a new aspect to the Individual Savings Account, the Lifetime ISA. This new ISA offers individuals under the age of 40 to open an account and save with flexibility for the long term. The LISA makes it possible to save simultaneously for your first home or for your retirement.

The new Lifetime ISA allows you to contribute up to £4,000 each tax year; as well as receiving interest on your investment the government will provide a 25% bonus (up to £1,000) at the end of each tax year. Those who open a LISA can gain these government top ups from ages 18 to 50.

The money saved within the account can be used to buy your first home (up to a purchase price of £450,000 anywhere in the country). On the other hand, you could keep the money within the savings account until your retirement without losing any bonus or receiving any extra charges. If you decide to withdraw your money before retirement for anything other than a house purchase you will incur a charge of 5% and lose the government top-up on the amount that is withdrawn.

The Lifetime ISA follows the same basic rules of an Individual Savings Account, including details required to open an account and tax year limitations. However, the LISA will also have its own rules to follow, these include:

  • The government bonus will be paid on contributions up to £4,000 per tax year with no monthly limit.
  • Government contributions into the account will stop at age 50.
  • Any payments made into the ISA will go towards your £20,000 a year (2017/18) savings allowance.

The Lifetime ISA is the perfect opportunity for you to plan and build for larger financial hurdles in life with the added bonus of up to £1 for every £4 you save. It’s flexible and can be used to help you buy your first home or kick start your retirement planning.

If you have any questions regarding a Lifetime ISA, ISA’s or Investments in general, contact us at People and Business, click here.