The Lifetime Individual Savings Account (LISA) is a way for individuals to save up to £4,000, tax-free, every year until they turn 50 – while earning interest on everything you save. Anyone between the ages of 18 and 40 can open one and you get the added benefit of a 25% bonus (up to £1,000/year) courtesy of the UK government.
This does not constitute advice and advice should be sought in all instances before acting on it.
Former Chancellor George Osborne introduced the concept of the LISA in the spring 2016 final budget.
It was an ambitious proposition in an attempt to draw in savers under 40 by combining two unlikely saving scenarios: help for a first-time home buyer’s deposit and a pension plan.
You can use the money you put into your LISA for one of two purposes: either savings (for interest building) or stocks and shares investing (for share growth).
A LISA for first time buyers helps potential homeowners save for the express purpose of using the money towards a house deposit. A LISA for retirement helps you save for when you stop working, only allowing access once you reach 60 years of age.
What’s happening to LISAs?
All in all, it seems like a great outlet to save towards a goal, but recently the scheme has drawn criticism from parliament and with many providers simply not offering the product, the LISA might already be on its way out.
The LISA officially launched in April 2017 amid some controversy – the Financial Conduct Authority worried about regulations and industry resistance. Their concerns may have been warranted – the financial services industry has been slow to offer LISAs, and while there are considerably more stocks and shares LISAs, they aren’t really regarded as feasible deposit saving schemes.
The Treasury Select Committee reviewed all aspects of LISAs and after their evaluation, their recommendation was to abolish it.
They were extremely critical of LISA’s complicated nature and its lacklustre incentives. The committee also took issue with the fact that there is no cohesive plan in place to integrate LISAs into the larger pension savings scene. These may all be contributing factors to their final criticism – they just aren’t very popular with both the financial services industry or pension savers.
With this in mind, be sure to stay up to date on any possible changes to or abolishment of LISA schemes. For an in depth review of your financial situation and help deciding the best savings avenues for home buying, retirement, and more, get in contact with one of our advisors.
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