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Monday, April 25, 2016

Lifetime ISA

Harnessing the simplicity and popularity of the ISA wrapper

The Government said the introduction of a new Lifetime Individual Savings Account (LISA) will help young people save exibly for the long term throughout their lives. The aim is to help them simultaneously save for a rst home and for their retirement, without having to choose one over the other.

SIMPLICITY AND POPULARITY

The LISA is designed to work in conjunction with existing ISA products and be simple for savers to use by harnessing the simplicity
and popularity of the ISA wrapper where contributions are made out of post-tax income but investment growth on savings and future withdrawals are tax-ef cient.

25% BONUS RECEIVED

From April 2017, people under the age of 40 will be able to open a LISA and contribute up to £4,000 in each tax year.The Government will then provide a 25% bonus on these contributions at the end of the tax year.This means that people who save the maximum each year will receive a £1,000 bonus each year from the Government. Savers will be able to make LISA contributions and receive a bonus from the age of 18 up to the age of 50.

TAX-EFFICIENT GROWTH

The bonus will be paid into the LISA at the end of each tax year so that savers will also bene t from tax-ef cient growth on the bonus from the time it is added. For example, a £4,000 contribution made by a 25-year-old into a LISA which grew at 4% a year would be nearly five times larger due to the government bonus and investment growth by the time they reach 60.