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| Budget 2016: New Lifetime Isa for homebuyers and retirement | Budget 2016: New Lifetime Isa for homebuyers and retirement |
| (about 2 hours later) | |
| Millions of adults under 40 will be able to use a new Individual Savings Account (Isa) to buy a home or a pension, the chancellor has announced. | Millions of adults under 40 will be able to use a new Individual Savings Account (Isa) to buy a home or a pension, the chancellor has announced. |
| The Lifetime Isa will be launched in April 2017, and savers will receive a 25% bonus from the government. | The Lifetime Isa will be launched in April 2017, and savers will receive a 25% bonus from the government. |
| They will be able to put in up to £4,000 a year, with the annual bonus of up to £1,000 paid until the age of 50. | They will be able to put in up to £4,000 a year, with the annual bonus of up to £1,000 paid until the age of 50. |
| And from April 2017 all savers will be able to put up to £20,000 a year into Isas, up from £15,240 at the moment. | And from April 2017 all savers will be able to put up to £20,000 a year into Isas, up from £15,240 at the moment. |
| So it will be possible to have both a standard and a Lifetime Isa, subject to the £20,000 limit. | So it will be possible to have both a standard and a Lifetime Isa, subject to the £20,000 limit. |
| The chancellor said that savers would be able to withdraw money from a Lifetime Isa at any time, and would not pay any tax on it. | The chancellor said that savers would be able to withdraw money from a Lifetime Isa at any time, and would not pay any tax on it. |
| Those wanting to use the money to buy a home will be able to do so after just a year; those wanting to use it for retirement will have to wait until the age of 60. | Those wanting to use the money to buy a home will be able to do so after just a year; those wanting to use it for retirement will have to wait until the age of 60. |
| Investors will be able to put their money into either a cash, or a stocks and shares Isa. | |
| Savers who have already taken out a Help to Buy Isa will be able to move their money into a Lifetime Isa. | Savers who have already taken out a Help to Buy Isa will be able to move their money into a Lifetime Isa. |
| If they have both types of Isa, they will only be able to use the bonus from one of them to buy a home. | If they have both types of Isa, they will only be able to use the bonus from one of them to buy a home. |
| The Help to Buy Isa scheme, which is slightly less generous than the new Isa, is due to end in November 2019. | The Help to Buy Isa scheme, which is slightly less generous than the new Isa, is due to end in November 2019. |
| 'Free top up' | 'Free top up' |
| Those using the Lifetime Isa to buy property can spend up to £450,000 on a home, but they have to be first-time buyers. | Those using the Lifetime Isa to buy property can spend up to £450,000 on a home, but they have to be first-time buyers. |
| The government said savers would be allowed to withdraw money in the event of "other life events", such as a terminal illness. | |
| But those just wanting to take money out for other reasons will not qualify for the bonus. They will also have to pay a 5% charge. | But those just wanting to take money out for other reasons will not qualify for the bonus. They will also have to pay a 5% charge. |
| "The Lifetime ISA is a fantastic boost for anyone under 40 who's fighting the growing cost of getting on the property ladder," said Hannah Maundrell, editor-in-chief of Money.co.uk. | "The Lifetime ISA is a fantastic boost for anyone under 40 who's fighting the growing cost of getting on the property ladder," said Hannah Maundrell, editor-in-chief of Money.co.uk. |
| "It's not quite so appealing if you already own a house, as your cash will need to be tied up until you're 60 to get the free top-up." | "It's not quite so appealing if you already own a house, as your cash will need to be tied up until you're 60 to get the free top-up." |
| More details of the Lifetime Isa here. | More details of the Lifetime Isa here. |
| Pensions Dilemma | Pensions Dilemma |
| For those wanting to save for retirement, the Lifetime Isa raises the issue of whether it is better to save through a traditional pension, or through the Isa system. | For those wanting to save for retirement, the Lifetime Isa raises the issue of whether it is better to save through a traditional pension, or through the Isa system. |
| Pensions are tax-free when you put the money in, but consumers pay income tax when they take the money out. | Pensions are tax-free when you put the money in, but consumers pay income tax when they take the money out. |
| Under the Lifetime Isa, money would be put in tax-paid, but would be free of all tax when taken out. | Under the Lifetime Isa, money would be put in tax-paid, but would be free of all tax when taken out. |
| "There is a huge risk that the Lifetime Isa will undermine pension contributions, undoing the hard work to get people saving'", said Mick McAteer, director of the Financial Inclusion Centre, a think-tank. | "There is a huge risk that the Lifetime Isa will undermine pension contributions, undoing the hard work to get people saving'", said Mick McAteer, director of the Financial Inclusion Centre, a think-tank. |
| Before the Budget, George Osborne had been considering introducing an Isa-style pension to replace traditional pensions, but rejected a change for the time being. | Before the Budget, George Osborne had been considering introducing an Isa-style pension to replace traditional pensions, but rejected a change for the time being. |
| However, some experts believe the Lifestyle Isa has similarities to that idea. | However, some experts believe the Lifestyle Isa has similarities to that idea. |
| "Philosophically it does seem to be a Pensions Isa, with a nod towards first-time buyers," said Nigel Barker, a personal tax partner at accountancy firm Deloitte. | "Philosophically it does seem to be a Pensions Isa, with a nod towards first-time buyers," said Nigel Barker, a personal tax partner at accountancy firm Deloitte. |
| "You're not as locked in as a pension fund; it feels more flexible." | "You're not as locked in as a pension fund; it feels more flexible." |