With the start of Spring and a new tax year upon us, workers will benefit from a £500 rise in their tax-free Personal Allowance and ISA savers will see their annual allowance rise to £20,000. Added to these enhancements is the launch of the new Lifetime ISA.
What is the Lifetime ISA (LISA)?
All individuals aged between 18 and 40 are now able to open a LISA. The maximum annual investment into the LISA will be £4,000 plus the £1,000 government bonus – potentially payable until the investor is age 50. The maximum £4,000. LISA contribution will count towards the new overall ISA allowance of £20,000.
Investors can use their LISAs to buy their first home (subject to a maximum price of £450,000). It can also be used to save for retirement, with tax-free access from age 60. Money can be accessed at any time, although this incurs a 25% charge. This effectively cancels out the government bonus paid on that amount, and some.
Unfortunately there are very few providers yet ready to offer an LISA. AJ Bell and Fidelity have both indicated plans to launch and Skipton Building Society will offer one in June.
If the LISA doesn’t have a negative impact on young peoples’ participation in workplace pension schemes, then this could potentially have a large positive impact for a generation perceived as ‘worse off than their parents’. It will hopefully help the age of the average first time buyer creep back below the 30 mark.