If you have yet to see much point in saving money in an ISA, a new incentive for 2017 could change your mind. This month sees the launch of a new Lifetime ISA – or LISA. For every pound saved in the tax year – up to a maximum of £4,000 – the state will boost the fund by 25%.
You have to under 40 – and over 18 – on that date to be able to open an account but you can reap this annual bonus until your 50th birthday.
This means that anyone saving the maximum allowed for the full permitted term of 32 years will ‘earn’ £32,000 for nothing. And it’s tax free if you keep it in there until you’re 60.
Even if you are too old to have a LISA yourself, you might wish to consider encouraging your children to start one and gift them the money to pay into it as an alternative to leaving them an inheritance. To do this just for a few years could be a welcome boost for first-time buyers because the usual 25% penalty for early withdrawal does not apply if they are withdrawing the money to put towards their first home.
And, in the spirit of Serenity Financial Planning, you will have the added pleasure of seeing them enjoy your gift.
Be aware, however, that the early withdrawal penalty, even accounting for the 25% bonus, equates to a 6% loss. What’s more, there are strict rules as to what constitutes a first time buyer. For instance, you can’t have inherited a house, even if you sold it on straight away.
Other options may be more beneficial, so speak to your Serenity Financial Life Planner today and see what will work best for you.