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On Thursday 6th April a new type of ISA is being launched, the Lifetime ISA (or LISA for short). Announced by the former Chancellor, George Osborne, LISA’s have been launched to help people save for their first home and for their retirement.

The LISA is just like any other ISA, a tax free wrapper for savings and investments, however unlike a normal ISA it is only available to those aged between 18 and 40.

It is designed for two specific purposes; for first-time buyers to use towards a deposit for a residential property and for later life savings once you hit age 60. If you decide to use the LISA to buy your first home, you can then keep it open and save for retirement. If you are eligible to open a LISA, you can deposit up to £4,000 per annum until you reach the age of 50.

The key benefit of the LISA is that the state will add an additional 25% tax free bonus when you withdraw the money on or after your 60th birthday.

This means that if someone opens a LISA on their 18th birthday and pays in the maximum amount each year, when they reach 60 the state will give them a bonus of £32,000!

Once you have held a LISA for 12 months, the money and bonus can be used by first-time buyers towards the home and mortgage deposits for any residential property costing up to £450,000. Two first-timers buying together can get a LISA each, effectively doubling the bonus. A first-timer buying with a non-first-timer can still get one and the bonus.

However, unlike a normal ISA, if you withdraw your money early (other than to buy your first house) there can be a 25% early withdrawal penalty!

As at 5th April there are currently only 3 confirmed LISA suppliers. The majority of the major banks and building societies have yet to decide whether they wish to offer LISAs.

Key facts about LISA’s

• You have to be at least 18 but under 40 to open one.

• You get a 25% bonus on everything you put in until you are 50.

• Ideal for almost every 1st-time buyer but you must have a LISA open for a year to be able to get the first-time-buyer bonus and use it for a property so even if you have no savings you should open a LISA with the minimum ASAP (can be just £1) to start the clock.

• It can be used for later life saving too – but please talk to us for a full LISA vs pension explanation.

• After the 1st year, other withdrawals have a 25% penalty – only put money in that you sure will be used for one of the two intended purposes!

SPEAK TO YOUR BURTON SWEET ADVISER NOW or please contact Rachel Finch, Partner, on 01934 620011 for further information, or email her at rachel.finch@burton-sweet.co.uk.