No, not the lady from 3 doors down! LISA! The new Lifetime ISA that was announced by George Osborne in March’s Budget.

Billed as a ‘simple alternative savings arrangement’ it offers freelancers a savings arrangement that matches the flexible lifestyle that many enjoy.

The Lifetime ISA will be operative from April 2017 and will be available for people aged 18-40. Any money you put into it before your 50th birthday will receive an added 25% bonus from the Government.

There is no maximum monthly contribution – you can save as little or as much as you choose each month up to £4,000 each year.  Effectively this means for every £4 you save, you will receive £1 from the Government. Looking at it on a larger scale, it means you could receive an additional £1000 for every £4000 you save.

Can I use the money for what I want?

Under the age of 60, no you can’t. The money must be used towards purchasing your first home up to the value of £450,000. The emphasis here is on ‘first home’, if you already own a property you will not be able to use this money towards the purchase of another home.

Over the age of 60, yes you can. After your 60th birthday, you will be able to withdraw all the money tax free. Caution is needed though, if you decide to withdraw the money out of the ISA before your 60th birthday and spend the money on non-property, you will be hit by a 5% charge and must return the Government bonus and any interest or growth on that bonus.

Is it worthwhile putting money into LISA?

As long as you are saving the money into the Lifetime ISA to be used for the purposes set out above, then yes it is worthwhile putting money in to one. If you think you will need to withdraw the money before your 60th birthday for a non-property purchase, then you would be financially better off considering other saving options.

A Lifetime ISA has advantages if you are using it as a ‘pension savings’ pot. Firstly, most pension schemes only allow you to take out 25% tax free, a Lifetime ISA allows you to take out some or all of the money tax free. Secondly, a Lifetime ISA is not restricted by household, so if you are a couple and you both meet the age criteria, you could both save money into your own ISA.

As long as it is used as it is intended to be a Lifetime ISA gives the opportunity to save in a tax smart manner.

What if I am too old for a LISA

If you miss out on being able to invest into a Lifetime ISA, there are options still available to you. If you were thinking of using a Lifetime ISA for buying your first home:

1. You might qualify for a Help to Buy ISA (there is no upper age limit but you only have to November 2019 to open one)

or

2. The new personal savings allowance means most basic rate taxpayers can earn £1000 interest a year tax free.

If you were thinking of using a Lifetime ISA as a pension savings pot, you can take advantage of the increased annual limit (from £15,240 to £20,000) on ISA’s. This increase comes into place from April 2017.

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