Under-40s who open one of the new “Lifetime ISA” announced by the government in its latest budget could earn over £30,000 of government top-ups.
One of the biggest surprises in Chancellor George Osborne’s eighth budgets was the new ISA, which lets those under-40, most of whom are millennials, save up to £4,000 a year tax-free.
That cash can be put towards either buying a house or retirement and the government has pledged a 25% top up for any savings. That means you could get a free £1,000 a year if you take full advantage.
That cash can be put towards either buying a first house or retirement and the government has pledged a 25% top up for any savings. That means you could get a free £1,000 a year if you take full advantage. While it’s possible to take the cash out for something else, you would lose the government top up.
Let’s say you’re in a position to take full advantage of the allowance — saving £333 a month — by the time you hit 30. The Lifetime ISA matures when you hit 60, meaning you’d have 30 years of savings, worth £120,000. The government bonus on that would equal £30,000 — a big chunk of free change.
The new Lifetime ISA is part of a range of measures Osborne announced to “put the next generation first” and make the UK “fit for the future.” The ISA is meant to encourage young people to save, amid warnings of a mounting pensions crisis globally.
The Lifetime ISA sits alongside the government’s Help to Buy ISA, which also tops up savings with tax money to help young people get on the housing ladder. Osborne said Help to Buy ISAs can be folded into the new Lifetime ISA once they launch in April 2017.