What is a Lifetime ISA?
The Lifetime ISA is a type of savings account which is designed to help you save for two specific reasons:
- Purchase of your first home.
- Saving for retirement.
You can deposit a maximum of £4,000 each tax year, and the Government will award a bonus of 25% annually (up to a limit of £1,000 each year). So, for every £4 you save, you’ll receive a £1 Government bonus.
Who can open a Lifetime ISA?
To be eligible for a Lifetime ISA, you must be a UK resident aged between 18 and 39. Once you reach 40, you won't be able to open an account.
Are there any restrictions with the Lifetime ISA?
Yes, there are restrictions which are different depending on what you're saving for. If you're saving for your first home you must buy the property at least 12 months after the initial payment into the account, the property must be mortgaged and cost £450,000 or less.
If you're saving for later life, you won't be able to access to the funds until your 60th birthday. You also can't make any deposits or earn the bonus after your 50th birthday. However, you will still earn the interest that the provider pays.
If you need access to the funds outside of buying your first home or before you're aged 60 years old, there'll be a 25% Government charge on the amount you withdraw, which means you might get back less than you invested. There are some withdrawal exceptions, such as if you're terminally ill, with less than 12 months to live.
Is the Lifetime ISA right for me?
Lifetime ISAs aren't really flexible, so if you require access to your money other than buying your first home or retirement, this account might not be right for you. Take a look at our ISAs to see if one of them better suits your savings needs.
How can I open a Lifetime ISA?
Here at The Nottingham, we don't currently have a Lifetime ISA however our friends over at Beehive Money do - and you can open the account and manage it online.
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