The Lifetime ISA will launch in April 2017. A Lifetime ISA can be opened by anyone between the ages of 18 and 40. Savings of up to £4,000 a year made before the individual’s 50th birthday will earn a Government bonus of 25% – a potential bonus of up to £1,000 a year. There is no minimum contribution.
The Lifetime ISA can only be used to save for a deposit for a first home or to save for retirement. Where the savings are used as a deposit on a home, the bonus is only payable as long as the home does not cost more than £450,000. If the ISA is used to save for retirement, the savings and the Government bonus can be withdrawn tax-free once the individual reaches his or her 60th birthday.
If the savings are withdrawn for any other purposes, the Government bonus is lost and a 5% charge is also payable.