Launch of the LISA
The BBC has recently reported on the launch of the new LISA (Lifetime ISA). There are two types of LISA:
- one aimed at helping first-time buyers save towards a deposit for a first home and
- one to help over 60s save for (or for some lucky people, during) retirement.
The hope seems to be that the LISA will encourage under 40s to save for their first property and then encourage them to continue these saving habits and plan early for their retirement.
The LISA can be used to save up to £4,000/year tax free, to which the government will then add a 25% bonus: meaning that if the full £4,000 is saved, a bonus of £1,000 is added and even more can be added by interest.
A LISA can be opened (as of today) by anyone over 18 and under 40. Provided the LISA has been opened before you turned 40, you can then continue to save into it until your 50th birthday. Once opened, you can transfer the LISA to another provider, but if you are under 60 and use the money for anything other than buying your first property, penalties are applied. You also have to have the LISA for at least 12 months to be able to get the bonus to spend on your first home, so if you plan to buy within a year of opening one, the Help to Buy ISA may be more appropriate.
Unfortunately, there are very few providers of LISAs and banks and building societies are not keen to offer them, seemingly preferring the Help to Buy ISA.
Online money saving guru moneysavingexpert.com has produced a handy comparison between LISAs and Help to Buy ISAs which can be found here.
For those considering retirement, although you still must be under 40 (and so have at least 20 years before you can access any funds), moneysavingexpert.com also has a comparison between LISAs and pensions.
For further advice on purchasing your first home or planning for retirement, please contact our friendly and experienced residential property and private client teams. Whilst we cannot provide detailed financial advice, we can provide planning and legal advice and can point you in the direction of financial advisors who can help plan for your future.
Rebecca McCarthy is a trainee solicitor at Barker Gotelee.