Niel Gavin explains ISA and LISA
Written on 11/04/2019

Niel Gavin on LISA

So ISAs have been around for quite some time now, you have the Cash ISA, the Stocks and Shares ISA, the Junior ISA and the Help to Buy ISA, so what, pray tell is the Lifetime ISA?

The Lifetime ISA is another way for people to save for the longer term or their first home purchase and a way to get a boost to your savings. 

It’s aim is to be used for either a first home purchase or retirement (60+)  You can use it for Shared Ownership, Self-Builds and Help to Buy Loans in addition to the usual standard property purchase.

Plus you can get access to the monies on exchange (the Help to Buy is not available until completion)

Here’s the important facts:

You can save up to £4,000 each year into a Lifetime ISA.

You must have it open for a year before you can use it for a property purchase.

Each year you receive a 25% bonus (of the contributions) 

The maximum, cumulative bonus available is £33,000 (if you open it at age 18 and contribute the maximum each year until age 50)

If you use the funds for another purpose then there is a 25% penalty on the withdrawal

You can still invest a further £16,000 a year into another ISA.

If using it for a first purchase, that property must be valued at less than £450,000

The LISA limit is per person so a couple can qualify for up to £66,000 in bonuses.

You can use either a Cash or Stocks & Shares ISA within the LISA.

You’ll need to be aged 60+ to withdraw it for retirement without penalty.

You can have both a LISA and Help to Buy ISA but only one can be used towards a property purchase.

So in a similar vein to the Help to Buy ISA, the Lifetime ISA is worth considering, after all a 25% bonus on your contributions should not be ignored……if you look at it another way, it is a guaranteed return of 25%! 

But which should you use for a property purchase? LISA or Help to Buy?

Here are some tips:

If you plan to definitely buy a home at a value of less than £450,000, are between 18-39 and the purchase won’t happen within 12 months then you should get a bigger bonus with the LISA.

If you are older and need to buy quickly or are not quite sure if you’ll buy then the Help to Buy is possibly more relevant.

So get LISAing!

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