LISAs – Lifetime ISAs
Lifetime ISAs were introduced a couple of years ago. These are a savings alternative (like an ISA) for young people which can be used either for the first-time purchase of a house or can be accessed tax-free at age 60.
Why do I think these are great? Well you can put up to £4,000 a year into a LISA and the government will add a 25% bonus on top. That is a pretty good return on anyone’s money.
A LISA can only be used towards the purchase of a property that costs £450,00 or less and it must be bought with a mortgage. It can be used for a joint purchase as long as all purchasers qualify as first-time buyers. A LISA cannot be used until it has been open for 12 months.
If used like a pension then the great thing is that benefits drawn are not taxable. Pensions get tax relief going in but are taxable coming out.
There are a relatively small number of LISA providers but it is worth persevering for the bonus. A maximum £1,000 per annum is not a bad incentive for someone who is saving anyway.