Lifetime ISA (LISA) - What You Need To Know

The Lifetime ISA or LISA is a government backed scheme intended to help first-time buyers jump on the property ladder or save for retirement. This scheme took over the Help To Buy ISA which ended in November 2019. If you would like to read about it, click here.


The LISA is a savings pot dedicated to long-term saving for either your first property purchase or retirement. Just like the Help To Buy ISA, the benefit of the LISA is you are able to receive a 25% government bonus on top of your savings. It is a tax-free savings pot and you are able to save a maximum of £4,000 each tax year (April - April). This means that you're able to save more per year compared to the Help To Buy ISA which is £2,400 per year.


Unlike the Help To Buy ISA, the government is automatically calculated and added on top of your savings.


HOW IT’S CALCULATED:

Imagine your work payroll.

Payments made between 6th day of month one to the 5th day of month two are calculated. The bonus is calculated depending upon how much you deposited in that timeframe


PAYOUT:

The bonus is added MONTHLY and is paid 14 days after the 20th day of month two The benefit of this is that you don’t have to claim your bonus through a solicitor like you would for the Help To Buy ISA.


There is no cap on the amount of bonus you are able to earn. If you opened an account at 18 and kept depositing the maximum of £4,000 each year, by the time you reach 50 you could have earned up to £32,000 in bonuses.


Eligibility:

• Must be aged between 18 - 39 years old

• Must be a UK resident


You are only able to open on ISA account per tax year. If you and your partner are saving for a house together, you are both able to open one separately and use your bonuses together on the same property purchase.


If used towards your first property, the maximum property value is £450,000. If your first property purchase exceeds this value, you will not be able to use your government bonus towards this purchase.


As the LISA is intended to be a long-term saving product, if you intend to withdraw money for any other reason other than retirement or first time property purchase, you'll have to pay a 25% penalty fee on your money.


TERMS THAT ARE ALLOW FOR PENALTY-FREE WITHDRAWAL:

• If you are terminally ill

• If you are looking to purchase your first property at least 12 months AFTER the ISA has been opened (Max property value £450,000)

• From your 60th birthday


If you already have a Help To Buy ISA and feel as though a Lifetime ISA would be better suited to you, you are able to switch your savings into a Lifetime ISA free of charge. Find a LISA provider, contact them and let them know you'd wish to switch from your Help To Buy ISA. They'll assist you with the process and you'll still be able to receive the government bonus.


You are able to have both ISA accounts however, you are only able to receive the government bonus on one. There is no minimum monthly payment for the Lifetime ISA.

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