Lifetime ISA

[AtW]

Budget 2016: George Osborne defends disability benefit cuts after attacks from Labour - Telegraph

He planned to plug it with pension relief removal (leaving only whopping 25% "bonus" on "Lifetime ISA"), but referendum forced his hand, he did however prepped the ground - "Whoever has ears, let them hear..."

[jamesbrown]

20%: £5000 gross, taxed at 20% - £4000 net

But I have no doubt the Govt will spin it as if they were giving 25% extra...

Strictly true, but that money is getting taxed on the way out, regardless. It's an ISA afterall (a post-tax savings vehicle). A 25% ROI isn't too bad, before interest. If I understood correctly, they'd give you up to 1k per year for 10 years (or was it until 50?), and then you could withdraw at 60 and retain the (up to) 10k+interest gained, or suffer the gains plus a penalty for early withdrawal (perhaps not if it's for a house though; otherwise I don't understand the point about housing?). I haven't read the details but, on the face of it, you'd be nuts not to use this and max it out every year, in parallel to pension payments, although it's obviously a hook for future pension reform, so this double benefit won't last the full period.

[diseasex]

My accountant sent me this today:

Lifetime ISA

This is a new concept and is only for the under 40s, if you are over 40, maybe worth considering for your children and grandchildren? Its aim is to help younger people save for a house or their retirement.
The basic rules are:
You can invest up to £4,000 pa
The government will top it up with £1,000 up until the age of 50
You can take the money out again – but the government will take back its £1,000, any interest on the £1,000 and 5%
You can use it to buy a home up to £450,000
You can use it as a pension when you are 60, completely tax free
You can role into it, money from your first time buyer ISA
So if you, or someone you know, are 18 in April 2017 there is the potential to save £4,000 per annum until age 50 AND receive a £1,000 bonus from the Government for each of those 32 years. That will create a savings pot of £160,000 – and that’s before compound interest gets to work.

[mudskipper]

Yep - if you want to help your adult kids buy a house, this sounds like a good way of going about it.

[NickFitz]

Take the money out for the wrong reasons and, as well as taking away all the free money and interest, Gideon will also take a 5% "handling charge" from your capital. Nice little earner as the economy crumbles and people are forced to fall back on their reserves

https://www.gov.uk/government/upload..._explained.pdf

[sal]

It's essentially a subsidy to the banks. It will be eaten by the approaching negative interest rates on deposits, when we will have to pay the banks for the privilege.

[mudskipper]

Take the money out for the wrong reasons and, as well as taking away all the free money and interest, Gideon will also take a 5% "handling charge" from your capital. Nice little earner as the economy crumbles and people are forced to fall back on their reserves

https://www.gov.uk/government/upload..._explained.pdf

In the speech, he did say that they were looking at refunding the penalty if you put the money back in at a later date.

Given the alternative of a 'pension' account where you simply cannot access the money, it seems like a move in the right direction.

Edit: transcript here - he said refunding the bonus, not the penalty.

http://www.mirror.co.uk/news/uk-news...speech-7568185

"And we’re going to consult with the industry on whether, like the American 401K, you can return money to the account to reclaim the bonus – so it is both generous and completely flexible."

[suityou01]

I wonder, given our whinger in chief Mauve Monkey has outed himself as being 38, whether he will be too old to take out one of these when they are implemented. The irony would be ironic.

I will be 1 month and 5 days too old.

[d000hg]

£5k per year is probably not far off what regular folk put in their pensions?

[VectraMan]

Yep - if you want to help your adult kids buy a house, this sounds like a good way of going about it.

Not as good a way as dying.

If you use this to buy a house at a sensible age you're going to miss out on a couple of decades of free money. So surely this means you're better off not buying a house with it.

I'm too old anyway.