‘Invaluable’ ISA savings option could land you £1,000 a year bonus | Personal Finance | Finance
Brits saving up for their first home or retirement are encouraged to open a Lifetime ISA (LISA) – which could provide a £1,000 annual bonus.
A saver can deposit up to £4,000 into a LISA each tax year, and any deposits get a 25 per cent bonus, up to £1,000.
Brian Byrnes is head of personal finance at Money boxwhich currently provides the highest paying LISA, at 4.25 per cent.
He told Express.co.uk: “It’s proven to be an invaluable savings option for young people across the country and has already enabled a whole generation (around 130,000 people) to buy their first home, much earlier than it would be. be otherwise possible.
“Furthermore, more than any other product launched in recent years, the Lifetime ISA has helped drive real behavioral change among young people, helping them build and embed positive long-term savings habits earlier in life.”
The funds must be used to buy a first home or can be accessed when a saver is 60 – or any withdrawals will incur a penalty.
There are reports that Chancellor Jeremy Hunt is considering announcing changes to ISA policy in the autumn statement next week.
Under the current rules, the funds cannot go towards buying a home worth £450,000 or less.
Mr Byrnes said: “Looking forward, the Liza rules should undoubtedly be reviewed regularly to ensure the product remains fit for purpose.
“As we consider the next generation of homebuyers who are just starting a five to eight year deposit saving journey, we strongly believe that the price cap should be index linked to house prices and subject to annual review.
“This will provide much-needed reassurance and peace of mind to LISA savers who live and work in some of the most expensive parts of the UK and will ensure the product remains fit for purpose for all those who need it most here.
“Moneybox is also campaigning with the Chancellor to introduce a penalty-free ‘Emergency Withdrawal Allowance’ so that LISA savers are not penalized if they need their money in an emergency.”
Data from the group showed LISA savers were out an average of £400 when they had to make an unauthorized partial withdrawal, costing them £20 of their original savings.
Mr Byrnes added: “The Lifetime ISA is a fantastic product that has helped a whole generation of first-time buyers looking to save and invest their way towards a deposit and it is vital that we build on this success, to ensure it continues it forward, and to meet the needs. of the next generation of homebuyers.”
The 25 per cent bonus is paid monthly when someone deposits into their LISA. A person can open an account between the ages of 18 and 39 and deposit it up to the age of 50.
ISAs have the advantage that any interest earned or growth on investments wrapped in an ISA is not liable to tax.
The interest also does not count towards a person’s personal savings allowance, which allows a person to earn £1,000 in interest each tax year and pay no tax, if they are on the basic rate.
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