With the withdrawal of the Help to Buy ISA for new savers, the Lifetime ISA (LISA) can help savers towards the purchase of their first home, or retirement.
The Lifetime ISA (LISA) is a cash ISA available through a number of providers, that allows savers to put money aside towards a first home or for retirement, whilst receiving a 25% bonus from the government along the way.
Quick facts…
- The Lifetime ISA can be opened by savers between the ages of 18 and 39 and funds can be deposited until the saver reaches their 50th birthday, if they have not already been withdrawn for the purchase of a first home. Funds will then continue to earn the standard interest rate until the savers reaches 60 and the money can be withdrawn as and when the saver wishes free of charge.
- Up to £4,000 a year, tax free can be deposited and the government will then top it up with a 25% bonus (of up to £1,000 on top of the interest rate).
- To purchase a first home, the opening deposit must have been made into a LISA at least 12 months before the withdrawal or the 25% government withdrawal charge will apply.
- If funds are withdrawn other than for the purchase of a first home, or for retirement when the saver reaches the age of 60, a 25% government charge will be incurred. The funds cannot be withdrawn within the first 12 months of opening the account without also receiving the penalty charge.
- To use a LISA for the purchase of a first home, the saver must be a first-time buyer. The saver also cannot have owned or shared a property in the UK or abroad, inherited the property or be the beneficiary of a trust including property.
- Any government bonus will be received around 4-8 weeks following each deposit into a LISA, so if the maximum amount is deposited every year between the ages of 18 and 50, an overall government bonus will be received of £32,000, in addition to interest.
- The Lifetime ISA differs from other ISAs because savings will receive the 25% government bonus, in addition to the interest earned.
- More than one LISA can be held at a given time, but only one can be opened and funded within the same tax year.