With a Lifetime ISA you can put in up to £4,000 each year until you’re 50 years of age. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. Compare our expert providers below to apply.
For many people, it is hard to save, and even harder to be rewarded for saving in the current financial climate. As well as this, for many people under the age of 40 think saving to buy their first home is out of reach, and furthermore, many are not even thinking about saving for their retirement. To help combat the struggles of savings, the government introduced a product called the Lifetime ISA. The Lifetime ISA, or LISA as it is also known, is available for those aged between 18-39 to help encourage long-term saving.
A Lifetime ISA is a savings account set up by the government. It stands for a Lifetime Individual Savings Account. As the name suggests, it is designed to support you and encourage you to save for later in life. However, it can also be used to contribute to a first-time house purchase.
While the system has been set up by the government, many banks and building societies are offering the Lifetime ISA as a product and can provide slightly different deals and interest rates. However, the government allows you to add up to £4,000 to your LISA savings account every year, and in return, they will add a 25% bonus to your savings. The government will assist with a maximum of £1,000 bonus every year.
You can withdraw the money in the Lifetime ISA when you purchase your first home or are over the age of 60. You can also withdraw the money if you are terminally ill with less than twelve months to live. If you do not meet these criteria and still want to withdraw your savings, then you will face a 25% charge. Otherwise, your savings will stay where they are and continue to earn interest or investment returns until you reach the required age.
There are a few criteria you need to meet to apply for a Lifetime ISA. The requirements include;
A Lifetime ISA can deliver high returns for your savings with up to £1,000 per year if you save £4,000 a year yourself. This means the maximum bonus you can receive for your savings is up to £33,000 if you save the full amount from the age of 18 to 50.
The bonus you receive can be a significant benefit for a first home purchase as well as helping considerably for savings in later life. However, with lots of restrictions as to when you can withdraw the savings, it may not be the right option for everybody.
For those looking to be first-time buyers, then a Help to Buy ISA may be more beneficial. A Help to Buy ISA offers a 25% bonus, much like a LISA but can be used once you have saved £1,600. You can also withdraw the money at any time, but you do not receive the bonus.
Many banks, building societies and financial services offer Lifetime ISAs, and some will come with their own rewards as well as the support from the government. However, as a Lifetime ISA does have strict requirements on withdrawal, it is a scheme that you will need to be committed to for your future savings plan or for purchasing a property.