Savers aged between 18 and 40 can
open a new Lifetime ISA (“LISA”) from April 2017. LISAs are, according to HM
Treasury, designed to help young people to save “simultaneously… for a first
home and for their retirement, without having to choose one over the other”.
Up to £4,000 can be saved into a LISA each year by savers between the ages of 18 and 50, and LISA savers will receive a 25% annual government top-up to a maximum of £1,000 per year. LISA savings may be used towards a deposit on a first home worth up to £450,000 or can be saved until the age of 60 to fund retirement. LISAs are limited to one per person rather than one per household; therefore, two first-time buyers will both receive the government bonus when they buy a home together.
However, any withdrawals made before the age of 60 that are not for the purpose of buying a first home, will not only result in the loss of the government bonus (and any interest or growth from it), but will also incur an additional 5% penalty charge. Therefore, accessing your money early could prove expensive. Above all, you should not assume that a LISA is a substitute for a pension scheme. Pension contributions enjoy significant tax breaks; moreover, employees benefit from their employer’s contributions to their workplace pension scheme. Therefore, it’s important to take expert advice before making any far-reaching decisions.
Up to £4,000 can be saved into a LISA each year by savers between the ages of 18 and 50, and LISA savers will receive a 25% annual government top-up to a maximum of £1,000 per year. LISA savings may be used towards a deposit on a first home worth up to £450,000 or can be saved until the age of 60 to fund retirement. LISAs are limited to one per person rather than one per household; therefore, two first-time buyers will both receive the government bonus when they buy a home together.
However, any withdrawals made before the age of 60 that are not for the purpose of buying a first home, will not only result in the loss of the government bonus (and any interest or growth from it), but will also incur an additional 5% penalty charge. Therefore, accessing your money early could prove expensive. Above all, you should not assume that a LISA is a substitute for a pension scheme. Pension contributions enjoy significant tax breaks; moreover, employees benefit from their employer’s contributions to their workplace pension scheme. Therefore, it’s important to take expert advice before making any far-reaching decisions.
For
more information please do not hesitate to contact the team at Ward Williams
Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.
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