Money put into the account can be saved until the age of 60 and can be used as retirement income or withdrawn to purchase your first property.
Elsewhere, annual ISA allowance limits remain frozen for another year in 2016/17. From April 2017 the total amount you can save tax-free in an ISA will increase from £15,240 to £20,000. Contributions to a lifetime ISA will sit within the overall annual ISA allowance limit.
Points to consider
Savings from a new lifetime ISA can be used as retirement income or to buy your first home. There are some things to be considered before setting up an account:
- you can take out all of your lifetime ISA savings tax-free after the age of 60
- money can be withdrawn at any time before you’re 60, subject to a 5% charge
- withdrawing your money before the age of 60 will mean losing out on the annual 25% government bonus ( which is up to £1,000)
- savings can be used to purchase your first home up to £450,000
- you can transfer savings from a Help to Buy ISA to a lifetime ISA, but can only use the bonus from one account.