The Lifetime ISA (LISA)

Posted by David G. Evans

In today's U.K. budget, the Chancellor announced the New Lifetime ISA - a new saving product designed to help get young people saving.

The Lifetime ISA

 

The basic details are as follows:

  • any adult under 40 is eligible
  • up to £4,000 can be saved each year
  • The Government will add £1 to every £4 saved, to a maximum of £1,000
  • Government contributions stop at age 50
  • Money is not taxed when withdrawn at retirement (unlike pensions) or used to purchase a home
  • The scheme starts in April 2017

 

HootLoot welcomes any product which is designed to encourage young people to save, but would view it as a missed opportunity for anyone under 18 (who are not eligible). If this is a vehicle that is designed to save for a first home, as Mr Osborne suggests, then why not allow children to participate in the bonuses? A 25% bonus on what ever they could save would go a lot further towards a deposit.

Further, many children around the age of 18 are about to start tertiary education and be introduced to student loans. HootLoot wonders how many of these 18 year olds will have sufficient spare money to save into this vehicle. Had children been able to participate in the LISA scheme and tertiary education designated as an eligible use of the 25% bonus, the benefits of the LISA would have been shared more equally with the younger generation. Instead 18 year olds are more likely to be building-up and repaying student debt in priority to saving.

For those over 18, if the money is withdrawn before the age of 60 and not used to buy a home, they will lose any government bonus (plus interest or growth).

See here for more information.

 
 

 

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