Today sees the launch of the new Lifetime ISA - the account which aims to help people save for their first home or for retirement.
But what do we know so far about the LISA? Here is our guide to the information released to date.
How does the LISA work?
- Anyone aged over 18 and under 40 today (April 6th 2017) can open a Lifetime ISA.
- Savers can put up to £4,000 a year into the account, and the government will provide a 25% annual bonus.
- For first-time buyers, their savings and bonus from their LISA can go towards the purchase of a home costing up to £450,000 anywhere in the country.
What are the benefits?
- While the bonus earned with the Help to Buy ISA is paid on completion of a property purchase, the bonus earned with a Lifetime ISA is paid upon reservation - so the funds can be used towards the deposit.
- There is no minimum monthly amount which must be paid into the LISA - but you cannot exceed the annual £4,000 limit.
- Savers can continue getting the government bonus until they're 50, with a maximum of £32,000 available in bonuses (this is earned if you open the account at age 18 and save the maximum annual amount until you turn 50).
What are the pitfalls?
- No partial withdrawals can be made from an account, so taking money out effectively means closing the ISA.
- If you do not use the money to buy a home, you will be hit with a 25% penalty on any withdrawals you make before the age of 60.
- The earliest you can use the bonus from your LISA is in a year's time - so the earliest you can buy a home using the bonus will be in April 2018.
Who is offering the LISA?
- So far, none of the big-name mainstream banks have revealed details of whether they will offer a LISA.
- The only provider which has announced that it will offer the LISA is the Skipton Building Society, which plans to launch its LISA in June 2017.
- This is Money is reporting that some workplace pension providers plan to launch a Lifetime ISA scheme as part of a workplace benefits package later this year.
To find out more about the LISA, take a look at the government's Lifetime ISA page.