Lifetime ISA - LISA, reappears after a summer redesign

The Lifetime ISA – LISA – is back in the spotlight, after it disappeared over the summer.

In his final Budget, George Osborne announced the launch of the Lifetime ISA from April 2017.

The LISA, as it became labelled, was widely seen as a stalking horse for future pension reforms, and these might still emerge.

When Philip Hammond replaced Osborne in July, it was unclear whether the LISA would survive however the ‘new’ government introduced the Savings (Government Contributions) Bill in early September, setting out a broad LISA framework. The Bill was accompanied by an “updated design note” for the LISA, setting out the basic LISA structure:

You will only be able to start a LISA if you are aged between 18 and 40;
The maximum annual LISA contribution will be £4,000;
Any LISA contributions made before age 50 will attract a 25% government bonus, so a £1,000 bonus will be payable for the maximum contribution of £4,000. This bonus will be added monthly if contributions are paid monthly from 2018/19;
The range of eligible investments and tax treatment for LISAs will be the same as for the current cash and stocks and shares ISAs;
All or part of the value built up in a LISA can be withdrawn penalty-free from age 60 onwards or for the purchase of a first home worth up to £450,000; but any other withdrawals will normally attract a 25% penalty.

There has been much debate about whether a LISA contribution is better than a pension contribution (under current rules).

If you are in the position to choose between the two next April, then personal advice based on your own particular situation is essential. While a LISA and a pension have the same tax benefits during the investment period, at the stages of making contributions or drawing benefits, tax rules are distinctly different.

Get in touch to talk to us about pensions.

Please Note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.