Newspaper article The Journal (Newcastle, England)

Lifetime Isa Move towards Pension Change by Stealth

Newspaper article The Journal (Newcastle, England)

Lifetime Isa Move towards Pension Change by Stealth

Article excerpt

Byline: Vicky Shaw and David Hughes Reporters

ALIFETIME Isa to help the younger generation save for their first home and their retirement in the same pot has been unveiled by the Government.

The new accounts, set to be available by April 2017, can be opened by people aged between 18 and 40 and any savings they put in before their 50th birthday will receive an added 25% Government bonus.

This means 25p will be added by the Government for each PS1 put in.

Some experts suggested the new scheme heralds the introduction of a "pension Isa by stealth", and will mean future generations increasingly favour Isas, which are built up from taxed income, over pensions, which are only taxed when the cash is withdrawn.

The new scheme will mean that over their lifetime, savers putting PS128,000 away will be able to get a government bonus of up to PS32,000, plus any growth on their investments.

A Treasury spokesman said the Lifetime Isa is a "radical new way for the next generation to save".

He said : "It is designed to address the choice that people who are 30 or 40 face in terms of having to choose between saving for a first home and saving for retirement."

The scheme will mean savers can put in up to PS4,000 a year, and receive a Government bonus of 25% - or up to PS1,000 a year. People can save as much or as little as they want each month.

Savers can use some or all of the cash towards a deposit for a first home, worth up to PS450,000 across the country. The accounts are limited to one per person rather than per home, so two first-time buyers purchasing a property together can both receive a bonus.

Aspiring home buyers who are already saving into the recently launched Help to Buy Isa will be able to transfer their savings into the Lifetime Isa in 2017. They can continue saving into their Help to Buy Isa if they want to, but they will only be able to use the bonus from one account to buy a house, the Government said.

Savers can also use the new Lifetime Isa to save for their retirement and take all of their savings tax-free after their 60th birthday.

People can withdraw the money at any time before they turn 60, but they will lose any Government bonus as well as any interest and they will also have to pay a 5% charge. …

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