The Financial Group
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THE EDUCATION SECTION   May 2017 With each News & Views we look at a particular financial topic in a little more detail. This month it is the Lifetime ISA & the Help to Buy ISA ____________________________ Meet LISA.  Starting a relationship with LISA may work out, but beware, it might turn out to be a ‘fatal attraction’. The Lifetime ISA (LISA) is to be a new option for those aged between 18 and 40 saving for retirement or a house deposit. Introduced on 6 April 2017, those eligible are able to save up to £4,000 each tax year and receive a 25% bonus at the end of the year from the government. As with a regular ISA, the money grows tax-free. The pot can be used to buy a first home of up to £450,000 at any time from 12 months after opening the account. Accounts are limited to one per person rather than one per home – so two first time buyers can both receive their 25% bonus when buying together. Alternatively, or in addition, the pot can be withdrawn tax free from age 60 for use in retirement. Any savings added before age 50 will also receive the 25% bonus. A further option is withdrawing the money at any time before you turn 60, but there are penalties. The government bonus, and any interest or growth on that bonus, would be lost - and there would be a 5% charge on top. Ouch! The FAQs about LISA What can I hold within a LISA? Qualifying   investments   in   a   Lifetime   ISA   are   the   same   as   for   a   cash   or   stocks   and   shares   ISA.   Please   refer to our ISA guide  which explains more about this. Can you have an ISA and a Lifetime ISA? Yes.   However,   the   total   amount   you   can   save   each   year   into   all   ISAs   is   £20,000   from   April   2017   -   £4,000 of which can be to a Lifetime ISA. Can I transfer existing ISA’s into a LISA? It   is   possible   to   transfer   savings   from   other   ISAs   as   one   way   of   funding   a   Lifetime   ISA.   In   line   with   existing rules, transfers from previous years’ ISA contributions will not affect that year’s overall ISA limit. What about Help to Buy ISAs? Help   to   Buy   ISAs   will   still   be   available   until   November   2019.   It   will   be   possible   to   open   a   Lifetime   ISA alongside   a   Help   to   Buy   Isa.   However,   it   will   only   be   possible   to   use   the   government   bonus   from   one   of these accounts to buy a first home. Can I transfer my Help to Buy ISA into LISA? During   the   2017-18   tax   year   only,   those   who   already   have   a   Help   to   Buy   ISA   will   be   able   to   transfer   these funds into a Lifetime ISA and receive the government bonus on those savings. Should I still save into a pension if I am between 18-40? The   combination   of   tax   relief   along   with   any   employer   contribution   is   likely   to   mean   that   pensions   are   in many   cases   mathematically   a   better   option   for   those   purely   focused   on   saving   towards   retirement   especially   for   higher   earners.   However,   if   enacted,   the   Lifetime   ISA   could   be   used   as   an   alternative,   or   an addition   to,   pension   savings   and   allow   the   younger   generation   to   ‘mix   and   match’   the   advantages   of pension   contributions   with   a   new,   enhanced   ISA   to   maximise   savings.   For   those   under   40   facing   the difficult   choice   of   whether   to   save   for   a   first   home   or   for   retirement   the   flexibility   of   the   proposed   Lifetime ISA offers a potential solution. Help To Buy ISAs at a glance Help   to   Buy   ISA’s   were   launched   by   the   Government   to   encourage   people   to   save   for   their   first   home,   they will,   in   time,   be   replaced   by   the   Lifetime   ISA   or   LISA   which   offers   the   same   tax   advantages   as   the   Help   To Buy   ISA,   but   offers   the   flexibility   of   saving   for   either   a   new   home   or   your   retirement,   albeit   it   should   be noted   the   penalties   for   withdrawal   (other   than   to   buy   a   new   home   or   before   age   60)   are   more   punitive   on the Lifetime ISA. The key points o Flexible saving for your first home. o 25% tax free from the Government on whatever you save. o Available to those aged over 18 who are saving for their first home. o New plans available until December 2019, with ongoing savings available until December 2029  o Pay in up to £200 per month (£1,200 in your first month) For a detailed overview from HMRC of the lifetime ISA and its interaction with Help to Buy ISA’s click here As always, please do not hesitate to contact us  if you would like further details or information.