ECONOMIC OUTLOOK | Pensions
Can Lisa( with an S) Hit the High Notes?
Will the Lifetime ISA be a hit or a miss? Tony Lloyd voices his concerns
The song“ LIZA with a Z” may have been a huge hit for Liza Minnelli back in the 70s but whether the Lifetime ISA –“ LISA with an S” – will be a hit or a miss is far from certain.
The LISA was first announced in the Budget last March and launched at the beginning of the new tax year in April. With a LISA you can save up to £ 4,000 a year with the State adding a 25 % bonus on top. You must be aged 18 or over, but under the age 40 when you open one, and you can contribute up until you are 50.
It follows therefore that you could earn up to a maximum of £ 32,000 in bonuses if you open one on your 18th birthday and contribute the maximum £ 4,000 each year until you are 50. A sizeable incentive which should be sufficient to attract the most negative of savers.
You have two options with the LISA, the first is for first-time buyers to use it towards the purchase of their own home which can be done at any time, the second is to use it to fund retirement from the age of 60. Like all the ISA products the proceeds are tax-free when you realise your investment.
For a first-time buyer you would be foolish not to use a LISA as, with its cousin the Help to Buy ISA, there is no other scheme that comes remotely close to matching the benefits. To be frank even if you’ ve only an inkling you may buy a home, it’ s worth starting as it would give you a head start on saving for retirement should you not use it for home purchase.
The decision to use this as a vehicle for pension savings is not so straightforward and there is no definitive answer. R dofonline. co. uk DIRECTOR OF FINANCE 39