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THE INVESTOR
IN YOUR INTEREST
A new government initiative is encouraging younger
savers to put money aside for a new house or
a private pension pot, with a 25% incentive bonus
By Tony Wickenden
F
rom next April, people
under 40 will have to get to
know LISA – not a person,
but a new savings product.
The Lifetime ISA aims to
encourage younger savers to put aside
money for their retirement or a house
purchase.While the full details are yet
to be announced, we do know that the
tax incentives will be attractive: broadly
speaking, those under the age of 40 can
save up to £4,000 in each tax year and
the government will add a 25% bonus
on the contributions at the end of that
tax year. So anyone saving the maximum
£4,000 will receive £1,000, bringing
the amount invested up to £5,000.This
is equivalent to basic rate tax relief but,
importantly, it is provided via a cash
bonus rather than tax relief.
While LISAs can only be opened by
people aged under 40, the government
bonus on contributions will continue
to age 50.That means someone who
opened an account at the minimum
age of 18 and saved for the full 32
years would be able to put in a total
of £160,000 (including £32,000 of
government bonuses) before taking
account of investment returns.
Contributions can continue beyond 50
but without the 25% bonus.
LISA funds can be accessed at any
time after one year to buy a rst home
worth up to £450,000. Joint purchasers
can combine their LISAs and each will
bene t from the government bonus.
The withdrawal must be for a deposit on
a rst property and the funds invested,
together with the government bonus,
Average flexible
payment taken
232
INDIVIDUALS
£4.35
Flexible payments
taken in first year of
pension freedoms
BILLION
THOUSAND
took flexible
payments
PENSION
WITHDRAWALS
Pension freedoms
give people flexible
access to their pension
funds as a lump sum
1. www.gov.uk,April 2016
£18,750