The under 40s will get a boost to their savings from next April if they take out the new Lifetime ISA, announced in the latest Budget. For every pound they put in savers will get a 25% bonus from the Government – so that’s potentially an extra £1,000 every year if people save the maximum £4,000.
And although it’s targeted at people aged under 40, savers will be able to pay into their Lifetime ISA and receive the Government bonus up to the age of 50.
Chancellor George Osborne said the new ISA had been created to encourage younger people to save towards their retirement, but it will also offer a helping hand to first time buyers. Savers who want to tap into their Lifetime ISA to get on the housing ladder will be able to withdraw their money after 12 months of saving. Those that already have a Help To Buy ISA will be able to transfer their money into the new Lifetime version.
People saving towards their retirement won’t be able to touch their cash until they reach 60, providing more incentive for people to save longer. If they do withdraw any money they will lose the Government bonus, as well as any interest or growth on the bonus, and pay a 5% charge. However the Government is considering allowing people to withdraw money early in certain circumstances it’s calling “life events”.