Lifetime ISA Savings Account
Posted on: Jul 18 2017
A Lifetime ISA can be a great way to save for your first home or for later life.
What is a Lifetime ISA?
A Lifetime ISA is an individual, long-term savings account. You can put up to £4,000 worth of savings a year into it until you reach 50 years old. The Government will add an extra 25%, up to a maximum of £1,000 per year. The idea is that the funds are only withdrawn for retirement purposes once you reach 60 or when you buy your first home. It’s a great alternative or addition to a pension and also perfect for first-time buyers.
As with other ISAs, you don’t have to pay any tax on the interest, income or capital gains from any cash, stocks or shares held within the ISA.
If the £4,000 limit is used, it’ll form part of your overall annual ISA limit. For the 2017/2018 tax year, the ISA limit is £20,000.
Who’s Eligible for a Lifetime ISA?
To take out a Lifetime ISA, you must be aged 18 or over and under 40 years old. You must also be either a;
- Resident in the UK
- A Crown Servant (e.g. a diplomat or civil servant)
- The spouse or civil partner of a Crown Servant
Providers may have their own terms and conditions that you need to meet when you sign up for an account, which we recommend discussing with your financial adviser.
When Can I Withdraw Savings from My Lifetime ISA?
You can withdraw savings held in your Lifetime ISA before your 60th birthday or purchasing your first home, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw. You’ll also have to pay a withdrawal charge if you transfer funds from your Lifetime ISA to a different type of ISA account.
To clarify, withdrawal charges don’t apply if you’re:
- Using it towards buying your first home (worth less than £450,000)
- Aged 60 or over
- Terminally ill (with less than 12 months to live)
- Transferring funds to another Lifetime ISA with a different provider
Also, there won’t be a charge for withdrawal of funds or assets from this ISA if you die. It would end on the date of your death.
For guidance on choosing the right savings option for you please call ADN Financial Solutions on 02392 822 616 or click here to email us.
Please note: Your home may be repossessed if you do not keep up repayments on your mortgage. The value of investments and pensions and the income they produce can fall as well as rise. You may get back less than you invested.