Lifetime ISAs Announced
In today's budget the chancellor announced a brand new type of ISA designed to help young people save for both the deposit on a first-time home and their retirement simultaneously.
Lifetime ISAs Announced
In today's budget the chancellor announced a brand new type of ISA designed to help young people save for both the deposit on a first-time home and their retirement simultaneously.
Available from April 2017, the 'Lifetime ISA' will allow savers aged between 18 and 40 years old save for both property and retirement within the same product, in addition to earning tax-free interest on their saving the government will contribute a 25% bonus to money saved within the ISA.
Savers will be limited to depositing a maximum of £4,000 a year within the new Lifetime ISA scheme meaning those who contribute the maximum each year could gain an annual bonus of £1,000 from government contributions.
Withdrawals
Savers will be able to make full or partial withdrawal of their savings, along with any interest and government contributions to either purchase a first time property (to a maximum value of £450,000 which must be located within the UK) or from their 60th birthday. If a saver decides to use the money for the deposit on their first property then any left over, including the bonus, can still be used for their retirement and they can continue to save.
For retirement full or partial withdrawals can be made from the age of 60. The money can be used for any purpose and will be paid free of tax, funds are permitted to remain invested and any interest and investment growth will be tax-free.
The government has also proposed that savers can make withdrawals at any time for other purposes, but without bonus or interest and subject to a 5% charge.
How much could you save?
Theoretically someone who opened an account at 18 and saved the maximum amount each year until they turned 50 could potentially earn £32,000 worth of bonuses and will end up with £160,000 in their account.
Any contributions to a Lifetime ISA will sit within the overall £20,000 ISA contribution limit however savers with a Lifetime ISA can still open Stocks & Shares and Cash ISAs.