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Don’t miss this free government money for Club 18-39

surprise.giftNice to get a gift, isn’t it? Those lucky savers who invested in the Lifetime Isa (Lisa) before 6 April this year have recently had a handout from the government of 25% of their savings.

In total, 140,000 Lisa investors got an estimated £114 million bonus which, finance firm Hargreaves Lansdown (HL) worked out, makes an average of £812 per investor.

If you’re trying to save for a deposit for a house, that kind of cash is a real boost. It’s also higher than the average bonus paid on the Help to Buy Isa at £767, HL calculated. This kind of Isa is also aimed at helping first-time buyers on to the property ladder.

Poor old Lisa: it’s been an unloved savings plan ever since launch. You can get a maximum of £1,000 in top-up on a total yearly saving of £4,000 per person. This doesn’t sound a lot until you realise you can keep doing it until you’re 50. If you started at 18 and kept going, you’d net £32,000 in total.

Of course there’s a catch: the money must be used for retirement or buying a house. If not, there is a whacking 25% penalty if you take the money before age 60 or don’t use it to buy a property (except in case of death or terminal illness). And, if you invest the money in shares, there's the potential to lose it depending on stock market conditions.

You’ve also got to be aged between 18 and 39 to open a Lisa. You wouldn’t believe it but this actually rules out both my Skinted colleague, Charlotte, and myself. But there are plenty of other SMMs (or their older children) who might benefit if they start now.

The clawback has put off a lot of banks and savings firms from offering Lisas. There is only one cash Lisa (from Skipton Building Society) while the choice on an investment Lisa (in stocks and shares) is only slightly better. This includes AJ Bell, Hargreaves Lansdown, The Share Centre and online-only firms Nutmeg and Moneybox. You will pay a small fee for an investment Lisa while a cash one is free.

Nonetheless, I think it's interesting that the poor take-up by finance firms hasn’t stopped tens of thousands of savers signing up. Definitely worth a little look for those who qualify.

See our full SMM guide to the Lisa here.

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Thursday, 16 August 2018