In March the Chancellor rose in Parliament to deliver his latest Budget announcement, declaring it a Budget for the ‘next generation’.
As part of his speech George Osborne introduced an innovative new Lifetime ISA designed to help those under the age of 40 save towards their retirement or a first home.
Under the scheme, savers will be able to deposit up to £4,000 each year, and receive a government bonus of 25 per cent (£1,000 a year) in return.
Savers will benefit from the bonus if they use some or all of the money to buy their first home, or if they decide to keep it until they are 60 to support them in retirement.
Anyone between the ages of 18 and 40 will be able to open a Lifetime ISA and deposit savings into the account up until their 50th birthday.
The new ISA will be available to eligible savers from April 2017 and there will be no maximum monthly contribution.
Savers can save as much as they want each month, but will only receive the government’s bonus on the first £4,000 a year. Accounts are limited to one per person rather than one per home, allowing two first-time buyers to receive the bonus when buying together.
Those with a Help to Buy ISA can transfer those savings into the Lifetime ISA in 2017, or continue saving into both, but couples will only be able to use the bonus from one of the ISA types to buy a house.
After a saver’s 60th birthday they will be able take out all of the savings tax-free. However, should a person wish to withdraw the money before this date, they will lose the government bonus and any interest or growth on this. They will also have to pay a five per cent charge.
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