Lifetime ISAs now more flexible

Lifetime ISAs have been a great way to save and invest for the future since they were introduced. For a short time they are more flexible with a lower withdrawal fee, but don’t rush into taking cash.

Lifetime ISAs have been a great way to save and invest for the future since they were introduced. For a short time they are more flexible with a lower withdrawal fee, but don’t rush into taking cash.

The Lifetime ISA has been an important investment tool since 2017. It was introduced to give anyone aged between 18 and 40 the chance to save up to £4,000 a year and get a government bonus.

The potential annual savings bonus is 25%. Those eligible can receive up to £1000 payable at the end of each tax year – until they reach 50 years of age.

The decision to alter the LISA withdrawal charge is part of the government’s response to help individuals and businesses. Ultimately, it’s another measure to boost the UK economy during difficult times.

What can the Lifetime ISA be used for?

The Lifetime ISA was established to assist younger people save towards their first home. The LISA can also be used in later life, as part of retirement funding.

Like many other long-term financial products aimed mainly at savers, taking out funds early in the process will normally incur a penalty charge.

Previously, the Help To Buy ISA was a key savings tool for young people looking to get on the property ladder. That savings scheme was closed to new applicants in late 2019.

Why should investors access LISA cash?

When cashflow is short, access to savings can be a huge help. Recent changes announced by the government mean that people can temporarily withdraw some of their Lifetime ISA (LISA) with a reduced charge.  

For some, during tough and challenging times throughout the coronavirus pandemic, being able to use investments could ease pressure. Crucially, it could assist families and businesses with monthly expenditure if income has reduced.

The opportunity to access funds with lower fees applies for a limited period. Between 6 March 2020 and 5 April 2021, holders of LISAs can withdraw cash at a charge of 20% instead of 25% of the amount taken out.

While the percentage charge sounds a lot, it’s a significant drop. However, it’s also a fee that could make investors think carefully about their actions ahead of any withdrawal.

In effect, what this means is that savers will get back all the money they invested – less any losses suffered because of market performance. Account holders must only pay back any government bonus they received.

Independent financial advice about ISAs   

How we all save varies from person to person. We all have different goals, different incomes and a different attitude to risk. All these factors should be considered when deciding which financial products can help you to achieve lifetime targets.

Logic Wealth Planning has advised savers about ISAs for many years. Understanding the implications about withdrawals is vital to avoid adversely impacting your plans.

Taking guidance from an independent financial adviser will help you understand what can and cannot be done when it comes to accessing funds. This gives peace of mind when you need it most. It also empowers you to make the best decisions to suit your lifestyle – now and in the future.

We can help with cashflow planning. This will let you see how your immediate actions might change things for you and your family in the future.

Please be aware the value of investments or income from them can fall as well as rise. We’re independent, and we’re here to help you make informed decisions.

Call us on 0808 1234 321 or info@logic-wp.com to arrange a no-obligation chat.

Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire and the surrounding area, but not limited to the region.