Back in March 2016, during the budget speech, the chancellor announced plans for the launch of a new addition to the popular ISA family of products, with the introduction of a new Lifetime ISA or LISA.
The Lifetime ISA - LISA
As with traditional ISAs, LISAs are available in both cash and stocks and shares options, to suit individual product preferences.
The Lifetime ISA is intended to help young people save long-term for either their first home and/or for their retirement. They launched 6 April 2017.
Who is eligible for the lifetime ISA?
LISAs are available for individuals between the ages of 18 and 40, with any contributions made before the age of 50 eligible for a bonus payment of 25% from the Government.
As each individual can open a Lifetime ISA, two first time buyers can both benefit from the bonus, if they were buying a property together as a couple.
What is the Lifetime ISA (LISA) allowance?
Savers and Investors are able to contribute up to £4,000 each year into a LISA. Any contributions form part of the overall individual ISA allowance of £20,000.
How does the new Lifetime ISA work?
Saving and investing in a LISA is similar to other ISAs, with individuals making their contributions from their own money.
- Up until the age of 50 you can contribute up to £4,000 and receive the government bonus on your contributions. So, for every £4 saved the Government will add a further £1.
- Buying your first home you can use money from a Lifetime ISA to buy your first UK home (up to the value of £450,000).
- Saving for Retirement the Lifetime ISA can also be used to save towards retirement. From the age of 60 it will be possible to make tax free withdrawals. LISAs can also be used alongside other savings/pension provisions for retirement.
- Help to buy ISA If you currently have a help to buy ISA it will be possible to transfer it into a LISA between 6 April 2017 and 5 April 2018.
Do Legal & General offer a Lifetime ISA?
It’s still early days for the LISA and many financial services firms – including Legal & General are taking the time to review their options, rather than rushing out products. But it’s something you may want to consider when planning your ISA investments.
The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained. The benefit of the tax treatment depends on individual circumstances.
Please remember the value of investments and any income from them may fall as well as rise and is not guaranteed. You may get back less than you invest.