Lifetime ISA

Explained simply

What does a Lifetime ISA do?

A lifetime ISA can be used for two different purposes. First it can be used to build up a first time home deposit, second it can be used for retirement. There are two types of Lifetime ISAs, one which is a cash lifetime ISA and the other is a stocks and shares lifetime ISA.

Only those aged 18 to 40 can open a new account and at the end of the tax year or if used for purchase a 25% addition on contributions of up to £4,000 a year will be made to payments into the account before age 50 is reached. The £4,000 is part of the overall ISA annual allowance, not in addition to it.

You can save up to £4,000 a year into the LISA as a lump sum or by putting in cash when you can. Then the state will add a 25% bonus on top. So if you save £1,000 you'll have £1,250 and if you save the full £4,000 you'll have £5,000. And that's before interest or growth.

What to look out for and fees:

Money can be used for a first home purchase priced up to £450,000 after 12 months; the money is paid to the conveyancer and can be returned to the ISA if the sale doesn't complete. Money can be withdrawn without penalty from age 60. A person who is diagnosed with a medical condition giving a life expectancy of under one year can withdraw the full amount including bonus without penalty at any age, using the definition in the similar pension law.he maximum bonus is £33,000 (unless the rules change). To get that you'd need to open one on your 18th birthday and keep contributing the maximum £4,000 each year until you are 50.  


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