Individual Savings Accounts (Isas) are a useful way to stash up to £20,000 each tax year in a wrapper the taxman can’t touch. They remain popular with savers, who poured a record £608 billion into adult Isas in 2017/18. But the focus is shifting. With interest rates on cash Isas pitifully low and the personal savings allowance exempting most people from paying tax on their savings, cash Isas’ popularity has waned, while inflows into stocks and shares Isas have hit new highs.
The Lifetime Isa (Lisa) has been surrounded by controversy ever since its adoption in April 2017. It’s the seventh member of the Isa family, and one that appears to have been set up specifically to squabble not only with at least one of its siblings, but also with its pension cousins just down the road.
State pension should rise in line with earnings, while ‘fundamental reform’ of pensions tax relief is needed, according to an influential cross-party parliamentary committee of MPs.
The average age of its Lifetime Isas customers is 26, with 72 per cent using the product to save for retirement.
The Lifetime Isa launched in April 2017 and lets account holders save £4,000 each year towards the cost of buying a home.
The Lisa was designed to help younger, cash-strapped adults but it seems to be most useful for higher earning investors.
Here is a summary of how it works, and some factors to weigh up before opening one.
Only a couple of providers are offering the product and some come with hefty charges.
Nearly a third of under-40s will cut the amount they invest into their pensions in favour of the Lifetime Isa.
Many under-40s would like to open a Lifetime Isa – but which providers actually offer it?