Choosing an Individual Savings Account is a safe thing to do in the long run. The Lifetime ISA comes with the great advantage of being able to earn a guaranteed bonus of up to a maximum of £1,000 every year. Such a bonus is guaranteed because the UK government will add 25% to any deposit in this account, up to a maximum of £4,000.
The only thing you need to do to be able to earn a £1,000 bonus every year is to deposit £4,000 yearly. If £4,000 per year is out of your reach, depositing less will still net you the 25% bonus from the government. This makes the Lifetime ISA a certain way to earn £1,000 extra every year.
Are you thinking of buying a home? You can use your Lifetime ISA to purchase your first property. Planning on leaving an inheritance can also be easily done with the Lifetime ISA. Lastly, this savings account is a great way to save up for your later years. After the age of 60, you will be able, at any point, to withdraw all of your savings free of any fees.
So, want to know how you can start a Lifetime ISA and receive up to £1,000 extra every year? Read on as we dig into the details, fees and how to apply.
Benefits of Lifetime ISA
The main benefit of getting a Lifetime ISA comes in the form of a 25% government bonus. In order to access this bonus, you must deposit a maximum of £4,000 a year, and the government will add 25% to that sum.
For example, if you deposit £10,000 in one year, your total account balance will be £11,000. Because of this benefit, any Lifetime ISA member can earn up to a maximum bonus of £1,000 every year.
You can continue to deposit your savings in the Lifetime ISA as long as you like. However, after the age of 50, you will no longer benefit from the 25% bonus offered by the government.
The Lifetime ISA is a great way to save for later in life. After the age of 60, if you choose to withdraw your savings, you will not pay the 25% charge. The total amount you withdraw past this age will include the 25% bonus offered by the government.
The purpose of this charge is to deter people from looking at Lifetime ISA as a short-term investment and recover the money invested by the government.
Another plus to having the Lifetime ISA is that you can use it to buy your first home. Keep in mind that the property cannot cost more than £450,000 and that you must have had a Lifetime ISA account for at least 12 months.
It is also mandatory to purchase the property using a mortgage and to have a conveyancer or solicitor implicated in the transaction.
A nice thing about the Lifetime ISA program is that you can choose to purchase a home using savings from multiple such accounts. This makes it ideal if both you and your partner have a Lifetime ISA and decide to purchase your first home together.
Fees and Rates
When you are saving in any type of Individual Savings Accounts (ISAs), the account is considered a tax-free account. However, there are a few fees to keep in mind.
Choosing to buy a property using your Lifetime ISA will come with a 25% withdrawal fee. You will be able to use your savings and your gourmet bonus in this transaction, but it will be subject to the above-mentioned 25% fee.
If for any reason you choose to withdraw your Lifetime ISA savings before the age of 60, a similar 25% fee will be deducted from your account. This works the following way: if you deposit £800, for example, the government will add a 25% bonus. This will take your account to a total of £1,000.
If you choose to withdraw the £1000, you will be subjected to a 25% fee resulting in a loss of £250. After the fee, you will have £50 less than you originally put in.
All of these fees have a fixed rate of 25% for a good reason. The purpose of a Lifetime Individual Savings Account is to save up for later in life, to buy a home, or to pass it on as inheritance.
How to Apply
If you wish to apply for a Lifetime Individual Savings Account, you must first fulfill the following criteria. First of all, you must be a permanent resident in the UK. This does not apply for servants of the crown active in diplomatic service.
Secondly, you must be at least 18 years old, and the maximum age for opening an Individual Savings Accounts is 39. If the above criteria are fulfilled, you can get a Lifetime Individual Savings Accounts (ISA) from a number of institutions.
These include banks, stockbrokers, friendly societies, building societies, peer-to-peer lending services, and crowdfunding companies. You could also obtain an ISA from credit unions and other financial institutions.
For queries on account administration, including applications, transfers, accessing your pension, payments, and online access, you can use the following details.
Phone: 0345 54 32 600
Note: There are risks involved when applying for and claiming this credit. Consult the terms and conditions page for more information.