Vide Transcript – Tax Free Savings – LISAs

There is a way to get some extra money from the government when you save towards buying your first home or towards retirement. This is called a Lifetime Individual Savings Account (LISA) and it means that you can deposit up to £4,000 a year and get a 25% government bonus so up to £1,000 a year. You also earn interest, and all the interest is tax free. But the catch is that you can only take out the money either to buy your first home or after you are 60 years old (or your heirs if you pass away). If you withdraw money for any other reason, you are charged a penalty that is higher than the government bonus, so you end up worse off.

But if you are saving up for the deposit of your mortgage it is a great way to increase your money. You can save money into a LISA from the age of 18 until the age of 50. You can only open a LISA if you are less than 40 years old. More details are here (https://www.gov.uk/lifetime-isa).  So, overall assuming a couple open LISAs at the age of 18 and save £4,000 each until they are 50 (33 tax years) the combined government bonus for both will amount to £66,000. This is not to be seen as alternative to a workplace pension which provides relief from taxation but as an add-on.