A couple of weeks ago I wrote about current challenges facing many young people – the difficult decision they may have when it comes to saving for a house deposit or saving for retirement. The proportion of young adults living at home with their parents has risen to its highest level for over 20 years, and with many trying to save for their first home a long term retirement plan might be forgotten.
The Lifetime ISA, a surprise Budget announcement may be a step to reversing this trend as it offers incentives for young people to save for the long term. An account can be opened any time between the ages of 18-40 and any savings (up to £4000 per year) put into the account until age 50 will receive a 25% (£1000 per year) bonus from the government.
The savings and the bonus can then be used as a deposit for a first home, worth up to £450,000, or saved for retirement, though if the money is taken before age 60, and not used for a home deposit, the bonus will be lost and a 5% charge applied.
The Lifetime ISA has been introduced to offer young adults more choice and a saver can still contribute to a Help to Buy ISA in addition to the Lifetime ISA.
The HM Treasury factsheet provides more information about the Lifetime ISA.
This fact sheet sets out all you need to know about the Lifetime ISA, announced at Budget 2016 – including how it will work. The Lifetime ISA will help young people save flexibly for the long-term. It will let them save for a first home and for their retirement, without having to choose one over the other.