THE OP­POR­TU­NITY OF A LIFE­TIME FOR YOUNGER SAVERS

Sunday Express - - Your Projects Count -

UN­DER THE NEW ‘LISA’ scheme, Bri­tons aged be­tween 18 and 39 can save up to £4,000 a year and re­ceive a 25 per cent gov­ern­ment bonus. This gives them a max­i­mum £1,000 a year, free money from the gov­ern­ment.

That takes the to­tal con­tri­bu­tion to £5,000, with any in­ter­est and growth on top of that. Bet­ter still, once you have opened an ac­count, you can keep claim­ing that bonus on money you pay in un­til age 50.

If you have saved money in a Help to Buy Isa be­fore April 6 you can trans­fer that into a Life­time Isa. Savers can­not ex­ceed next year’s max­i­mum £20,000 over­all Isa limit. A saver who opens a Life­time Isa on their 18th birth­day and con­trib­utes the max­i­mum £4,000 every year un­til they hit 50, would get a to­tal bonus of £32,000 un­der cur­rent rules.

If you are 40 or over on April 6, sorry, but you won’t be el­i­gi­ble. Only those born on or af­ter April 7, 1977, qual­ify.

If you are too old to ben­e­fit your­self, en­cour­age younger mem­bers of the fam­ily to take ad­van­tage.

Un­like nor­mal Isa in­vest­ments, the money can only be used for two things, prop­erty de­posit or re­tire­ment in­come.

The pri­mary aim is to help young peo­ple save a de­posit on their first home, which can­not be an in­vest­ment prop­erty, or cost more than £250,000 out­side of Lon­don, or £450,000 in the cap­i­tal.

If you have ever owned a prop­erty be­fore, even a part share of an in­her­ited prop­erty in­side or out­side the UK, you will not qual­ify.

De­spite these lim­i­ta­tions, Chris Hill, chief ex­ec­u­tive of­fi­cer at Har­g­reaves Lans­down, says it is a must-have for those sav­ing for their first home. “It builds on the suc­cess of the Help to Buy Isa in en­cour­ag­ing peo­ple to save to get on to the prop­erty lad­der.”

Al­ter­na­tively, it can be used to save for re­tire­ment, which means you can­not touch the funds un­til age 60 or beyond.

With­drawals are free of tax but be warned, there is a 25 per cent early with­drawal penalty if you take the money be­fore age 60 for any other rea­son than buy­ing a prop­erty. The Fi­nan­cial Con­duct Author­ity re­cently is­sued a state­ment say­ing that providers must warn cus­tomers about this penalty, and the po­ten­tial im­pact on any meanstested ben­e­fits they may claim later. Tom Selby, se­nior an­a­lyst at in­vest­ment plat­form AJ Bell, says that in­vestors must also be warned of other po­ten­tial risks. “For ex­am­ple, they could miss out on valu­able em­ployer pen­sion con­tri­bu­tions if they choose to in­vest in a Life­time Isa in­stead.”

Only a hand­ful of providers, Har­g­reaves Lans­down, Nut­meg and The Share Cen­tre, are set to of­fer Life­time Isas at launch but more should fol­low in time, in­clud­ing the big banks.

As ever, be sure to shop around for the best deal, and should you need more de­tails of the ben­e­fits of a Life­time Isa you can find fur­ther in­for­ma­tion on­line at www.life­timeisa.cam­paign.gov.uk

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