SAVERS have just hours to make sure they cash in on a free £1,000 from the government.
The benefit is for people with a Lifetime Individual Savings Account (LISA).
A LISA can be a great way to save for retirement or for a home
A LISA can be used towards retirement or buying a home, though there are rules around it (see below).
You don’t pay any tax on interest earned from these kinds of accounts and the government will top up your savings.
First-time buyers saving into a LISA can stash up to £4,000 into this account each year tax-free.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
For example, if you save £4,000, you’ll get a £1,000 bonus.
But savers only have until tomorrow to get the bonus as the new tax year begins on Thursday (April 6).
After that then you’ll miss out on the boost for the year.
You’ll be able to start again for the new tax year though so you’ll only have missed out for this year.
So if you’re able to, transfer as much as you can into your LISA account by tomorrow so you then get the maximum bonus.
The bonus is paid each month into your account – this money will also accrue interest.
But tally up if you can afford to part with the extra cash for a while.
You’ll have to pay a penalty to withdraw it for any reason other than buying your first home or for retirement.
So don’t transfer money you don’t have to spare into the savings account just because of the incentive.
Do also bear in mind that depending on who you save with, you may have already missed out.
Some providers have an earlier deadline which they’ll set themselves – so do check with them as soon as you’re able to.
Who can get a LISA?
There are also rules that govern who can open a LISA, and how it can be used.
You must be 18 or over but under 40 to open a Lifetime ISA.
When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus.
But your account will stay open and your savings will still earn interest or investment returns.
To withdraw the money, you must be buying a first home or retiring, otherwise you will lose your bonus and pay a 25% penalty.
People who are terminally ill with only 12 months to live can also withdraw their cash without paying a fee.
The account has to be open for at least a year before you’ll see the bonus added.
Then, the bonus is paid monthly – if you’ve put money in that month – and takes between four and nine weeks to arrive.
Bear in mind that contributions into a LISA will count towards your overall yearly £20,000 ISA allowance too.
How to find the best LISA?
Don’t forget to shop around for the best LISA rate.
You aren’t tied to one provider, so if you’ve got an account you can still shop around for the best rates.
You can use comparison websites like MoneySavingExpert.com to find the best one for you.
For example, Moneybox is currently offering a LISA with a 3.5% rate while Beehive Money is offering 3%.
They both required a minimum deposit of £1.
Other savings accounts are out there
Make sure you’re also comparing other types of savings accounts as a LISA might not be the best option for you.
There are five main types of savings accounts, and understanding the differences can help you narrow down the options.
- Easy-access savings accounts – usually allow unlimited cash withdrawals. However, this perk means they tend to come with lower interest returns.
- Regular savings accounts – generate decent returns but only on the basis that you pay in a set amount each month.
- Notice accounts – offer slightly higher rates than easy-access accounts but you’ll need to give advance notice to your bank (up to 95 days) before you can make a withdrawal or you’ll forfeit the interest.
- Fixed rate bonds – these offer some of the highest interest rates. However, if interest rates increase during your term you can’t move your money and switch to a better account.
- Individual savings accounts (ISAs) – these can pay high interest but come with high withdrawal fees. But, Lifetime Isas are great for anyone aged 18-39 hoping to buy a house or save for retirement.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
