The new Lifetime Isa was launched on 6 April 2017 and is aimed at two specific groups of savers: those saving for a first home and those approaching retirement. With its bonus top-up from the government, it is certainly something to take a look at.
Who Can Take Out a Lifetime Isa?
Two specific groups of savers are eligible for the Lifetime Isa. The first group is those saving for their first home, so the first-time buyer. The second group is those savers reaching retirement, so the over-60s. Which? has published a handy guide to opening a Lifetime Isa, which you can read here: http://www.which.co.uk/money/savings-and-isas/isas/guides/lifetime-isas.
What About the Bonus?
You can invest up to £4000 each tax year, either in one sum or by adding cash throughout the year when you have it to spare. At the end of the year, the government will add a further 25% of the amount that you have invested. For instance, if you invest £2000, the bonus will be £500.
Are There Any Age Restrictions?
Yes, you must be over 18 and under 40 to open the Lifetime Isa.
Are Withdrawals Allowed?
Withdrawals can be made, but it is best to try to avoid this, especially as your bonus will be affected. If you think that you may have to dip into this Isa, it may be worth considering some other type of savings account.
Once you have opened a Lifetime Isa, you are not locked-in to that one provider. If interest rates change, you can move your money to a Lifetime Isa with more favourable rates. As with all financial products, it is worth speaking to a financial adviser, as they have access to back office systems for IFAs and are well placed to provide you with current interest rates.
Cash Isa or Lifetime Isa
You can contribute to both in any tax year as long as you remain within the parameters of how much you can save in each of these tax wrappers. Again, financial advisers, who have access to the best financial software from providers such as https://www.intelliflo.com/, are a good source of information and guidance on this.
This new financial savings product is certainly worth considering, but you should seek financial advice to ensure that it is the right savings product for your current circumstances.