Lifetime ISA – What you need to know

Posted on February 21, 2017 by - Uncategorised

 

The new Lifetime ISA launch date is 6 April 2017. It will be a no-brainer for first-time buyers as the government will add a 25% bonus on top of what you save – this means there will be £32,000 of free cash. For retirement savings it works the same way, but whether it beats a pension or not is a much trickier conversation. If you would like to assess the options available to you, please contact 1st Financial Foundations for further information on 01908 523 420 or email info@95.154.196.167

LISA need to knows:

  1. You can save up to £4,000 a year, and get a 25% bonus at the end of each tax year
  2. You must be aged 18 or over but under 40 when you open one
  3. The money is to be used either towards a first home worth under £450,000 or once you’re over 60 towards retirement
  4. If you’re a first-time buyer, put £1 in a Lifetime ISA as soon as possible – even if you’ve no other savings yet
  5. The Lifetime ISA is an individual product – couples can have one each
  6. The money can be put into savings or stocks and shares: the longer you’re likely to keep it, the more you should consider share-type investments
  7.  As it’s an ISA, the savings interest or investment growth is tax-free
  8. You can have a Lifetime ISA and a Help to Buy ISA
  9. Once it’s opened, don’t think you’re locked in – you’re free to transfer it to another provider

Questions Answered

1. What happens to the cash in my LISA if I’m terminally ill, or I die?

There is a provision in the Lifetime ISA rules that allows you to access the cash as a tax-free lump sum if you’re terminally ill, provided that you have 12 months or fewer to live.

If you die, and you’re married or have a civil partner, your Lifetime ISA allowance passes to him/her to invest your Lifetime ISA savings. This is on top of their usual ISA allowances. However, the funds in the Lifetime ISA do form part of the estate for inheritance tax purposes.

2. What if I am planning to buy a home before April 2018?

If you need to buy a home before April 2018, the Help to Buy ISA is the only route available as you need to have had the Lifetime ISA open for 12 months before being able to withdraw it for a property purchase (the length of time you’ve saved in the Help to Buy ISA doesn’t count towards this).

If you’re unsure when you’ll buy, but it could be before April 2018, then it’s worth opening the Lifetime ISA on 6 April 2017 with £1, but keep saving in the Help to Buy ISA. If you don’t buy, just transfer the cash across on 5 April 2018 to the Lifetime ISA, then keep saving in that until you buy your first home.

Its important you receive expert and professional advice. To discuss your situation please contact us – 1st Financial Foundations, Independent Financial Advisers. Contact our Milton Keynes office on 01908 523 420 or London 020 3897 8100.

Information is based on current understanding and should be used only as a guide, professional advice must be sought to make financial decisions.

Source: moneysavingexpert.com