Should I bother with a Lisa? - a two-minute guide
Lifetime Isas (Lisa) have hit the headlines recently. It has already been recommended that the government scrap the Lisa just a year after it was introduced.
You can read more about the debate elsewhere on MoneyLens: The Lifetime Isa debate - what's it all about?
The Lisa’s “complexity” and “unpopularity” has been blamed but it still provides a decent leg-up for first-time house buyers.
If you, like many others, are struggling to save some money to get a deposit together for your first home then you should definitely considering bothering with a Lisa. Why? Because for every £4 you save into a Lisa the government gives you £1. Who would turn down free money?
But before I go on, what on earth's a Lisa?
What's a Lisa?
Lisa stands for Lifetime Individual Savings Account. As the name suggests, it is a close relative of the Isa. Totally lost in the Isa maze? Try this article where we explain the different sorts. I will save you the pain of a rehash, but there are some important differences between a Lisa and an Isa.
The main one being a free government top-up, although that is only up to savings of £4,000. But if you can stash away £4,000 in a year (maybe with some help) you could have a savings pot of £5,000 by the end of it.
That's a 25% power-up to your savings. Try finding anything like that being offered by your high street or internet bank.
There are catches (aren't there always?). You can only withdraw the money if you're using it to buy your first property(up to £450,000 and it can go towards the initial deposit at the start of the process). If not then there are some nasty penalties. The main one being that the government will take back 25% of the total amount you're withdrawing. That would include any income growth. Ouch!
So if you aren't saving for your first home have a proper think about saving into a Lisa.
You can still put money into a Lisa but to avoid penalties you won't be able to withdraw the money until you're 60 (way too far away) or, God forbid, you become terminally ill.
Below is a quick summary of the benefits of a Lisa:
Tax treatment depends on individual circumstances and may be subject to change in the future.