Lifetime ISA or Lifetime Individual Savings Account or LISA is a investment option for UK residents which will help you buy your first home or save for retirement (at 60 years). Anyone who lives in UK knows the difficulty to save their hard earned penny. If you work in a setup with a pension scheme like NHS or private pension, well and good, you will start getting your pension at your pension age. For NHS, pension age for 2015 scheme is a 68 years though. If you want a lumpsome money when you turn 60 years old, LISA helps you to achieve it. Also, LISA helps you save money with 25% input from government of UK when you buy your first home in UK. In this article we will discuss about LISA in detail.
Liftime ISA or LISA for first home or retirment lumpsome
We will go through common doubts such as What is LISA? Who can open a LISA? Types of LISA as well as benefits and disadvantage of LISA in this article.
What is LISA?
LISA stands for Lifetime Individual Savings account which helps you buy your first home or save for later life.
You can put in upto £4000 each year until you’re 50. You must make your first payment into your ISA before you’re 40 years of age.
Government will add a 25% bonus to your savings, upto a maximum of £1000 per year.
Different types of LISA account
There is two main kinds of LISA:
Cash LISA
- Works likes a savings account. You earn interest as well. Good if you wish low risk.
Stocks and Share LISA
- Money invested in share markets and funds
- Potential for higher returns – Capital is at risk because there is a chance or risk that you might get back less than what you put in.
Who can apply for LISA? (Eligibility)
- Aged 18 or over but under 40 when you open and contribute first payment.
- Resident in the UK
- Timelines – First payment before your 40th birthday, last contribution before you are 50 years old
- When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns.
When can you withdraw money from LISA?
You will be able to withdraw money from LISA when,
- You buy your first home (terms – property value less than or equal to £450000, UK only and you’ve held the LISA for atleast 12 months).
- Aged 60 or over (as retirement benefit)
- You are terminally ill with less than 12 months to live.
- If you die your Lifetime ISA ends on the date of your death. There’s no charge to withdraw the funds or assets from your account.
If you withdraw money for any other reasons, it will incur a 25% goverment charge or penalty, which effectively loses you not only bonus but a bit of your own savings too.
Merits and Demerits of LISA
Merits
- Generous Government bonus – 25% boost (upto 1000£/annum)
- No tax on interest, income or gains
- Can be used for first home purchase or retirement
- Two options, cash or investments
Demerits
- Withdrawal penalty of 25% if used for other purposes
- Property price cap of £450000
- If considering for universal credit, LISA savings may count as assets
- Investment LISA (Stocks and shares) – value can go up or down.
Where can you open a LISA account?
Lifetime ISA can be opened at all major high street banks and building societies, online savings platforms, investment platforms etc. Examples include, Hargreaves Lansdown, Nutmeg, Moneybox, A J Bell etc. Most of the providers will let you open online. You can also transfer an existing LISA to a new provider if you find better rates. Please check fees on each platform as their annual fees may vary.
Lifetime ISA (LISA) Calculator
This calculator provides estimates only and does not constitute financial advice. Investment values can go down as well as up. Government rules may change.
Conclusion
From this article, i hope you got an understanding of what LISA stands for? When and where to invest in LISA? and other commonly asked queries about LISA. Chooe LISA according to your requirement. LISA is not an alternative for your pension accout. But, it do supplement your retirement income that too at the age of 60.
More details on LISA can be accessed here.
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