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Lifetime ISA (LISA) – a whole new savings vehicle

The Chancellor has unveiled plans to introduce a new Lifetime ISA (LISA) from April 2017. This is an extra savings vehicle for younger savers.

LISAs will only be available to savers between the ages of 18 and 40.  Savers will be able to invest up to £4,000 per annum and will receive a 25% top up bonus from the UK government.  (This would give a maximum top up bonus of £1,000 per year.)  Savers will stop receiving their top up bonus once they reach age 50.

LISA contributions will count towards the total ISA savings limit which will increase to £20,000 in 2017/18.

Funds can be accessed tax free after the saver’s 60th birthday.   To help first time buyers, funds may also be withdrawn tax free to cover the cost of a deposit on their first home.

Accessing savings before age 60 for other reasons will be allowed but:

·   the 25% government bonus (and the growth on it) will be lost &

·   there will be a 5% tax charge applied.

LISAs will not be available until April 2017 and will not be suitable for every investor.  As with all financial matters, it is crucial to take independent financial advice before making any decisions.

Farrell Financial Planning are independent financial advisers based in Glasgow, Scotland.

This article is based on Farrell Financial Planning’s understanding of the proposed new Lifetime ISA.  We expect that some of the rules for LISAs may change between now LISAs being fully launched.  This article is for information purposes only and is not designed to give any form of financial advice.

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