The Lifetime ISA is set to launch in April 2017, providing an alternative option for young adults to save for their retirement or first home.

There have been concerns on whether or not the Lifetime ISA will have an impact on pension savings. A third of people under 40 are likely to invest in one when it launches, according to research by Platforum.

So is the Lifetime ISA right for your retirement needs? 

Details confirmed

The government recently published its Savings Bill confirming a number of important details of the Lifetime ISA.

Among the details outlined in the bill:

• individual’s contributions per year is £4,000 while receiving a 25% government bonus
• bonuses will be paid annually for the first year then paid monthly from 2018/19
• the government bonus plus interest growth on it will be removed and an additional 5% charge levied if savers withdraw their savings before the age of 60 or anything else other than purchasing a first home
• savings can be withdrawn tax-free after the age of 60
• savings can be put towards buying a first home worth up to £450,000.

HMRC’s fact sheet can be found here.

Eligibility

The Lifetime ISA will be open to people aged 18-40 from April 2017. 

Savers can contribute up to £4,000 per year and receive a bonus until they reach 50.

The Lifetime ISA is not open to those who are over 40 while savings can only be withdrawn then the person reaches 60. 

Things to consider

As the Lifetime ISA approaches there have been concerns on whether it will have an effect on long-term pension savings. Will people use it to supplement their workplace and personal pensions or will they use it as a complete replacement? 

Heather Hopkins research director for Platforum, said: “consumers claim their Lifetime ISA savings will complement their workplace pension savings rather than replace it.”

The Lifetime ISA can be useful for those looking to save for their retirement. However there are additional rules to abide to when saving:

• all contributions must fall within the ISA contribution limit. The annual limit will be £20,000 for 2017/18
• there is no monthly limit on contributions
• saving from other ISAs can be transferred to a Lifetime ISA.

Talk to us

If you have any further questions in regards to the Lifetime ISA contact us by completing the form on our website. 

Alternatively you can call us on 020 8977 0905 (Hampton Wick Office) or 01932 855644 (Weybridge Office) to speak to an adviser.