Martin's 6 Lifetime ISA must-knows

The LISA is a tax-free wrapper that lets you put up to £4,000 in it every year as cash savings paying interest, or stocks & shares giving investment growth (or loss). For detailed info jump straight to my new full Top Lifetime ISAs guide, but for speed here are the 6 must-knows...

1. You have to be at least 18 but under 40 to open one.

Anyone aged 18 to 39 can open a LISA. So those pushing 40 need to be speedy, eg, if you turn 40 on Friday, open it Thursday. If you're too old to open one, Help to Buy ISAs - while you can put less in - also have a 25% bonus and don't have an upper age limit. And check out our normal Top Savings & Cash ISAs guides. For (grand)parents wanting to help their (grand)kids buy a home, giving them cash to put in a LISA is a great way to do it.

2. You get a 25% bonus on everything you put in.

For every pound you contribute, the state adds 25% each year, until you're 50. So if you save the maximum £4,000 a year, you get £1,000 added. Someone starting at 18 maxing it annually could get £32,000 added (if the system doesn't change).

3. It's a NO-BRAINER for almost every 1st-time buyer.

Once you've held a LISA for 12 months, the money and bonus can be used by first-time buyers towards the home and mortgage deposits for any residential property costing up to £450,000. See full What counts as a first-time buyer info. Two first-timers buying together can get a LISA each, effectively doubling the bonus. A first-timer buying with a non-first-timer can still get one and the bonus.

4. It can be used for later life saving too - but be careful.

You also get the bonus if LISA money is taken out once you're 60+. You can even use a LISA first to buy a home, then keep it open and pay in to it for retirement. Yet unless you're self-employed and a basic-rate taxpayer, saving in a pension rather than a LISA's likely to be more lucrative. See my full LISA v pension explanation.

5. After the 1st year, other withdrawals have a penalty.

You can withdraw money from a LISA whenever you want, penalty-free, until 5 April 2018 (though you'll need to close it). After, unless it's for a qualifying first-time property, you've hit 60 (or have a terminal illness/die) there's a 25% penalty taken off withdrawals. The net effect of a 25% bonus, then 25% penalty, is you lose roughly £6 per £100 you put in (do it on a calculator if you don't believe me). So only put money in you're sure will be used for one of the two intended purposes.

6. Wannabe 1st-time buyer? Even if you've no savings, open a LISA with the minimum ASAP to start the clock.

You must have a LISA open for a year to be able to get the first-time-buyer bonus and use it for a property. So even if you open one this week, you'll be waiting until April 2018 before you can buy and get the bonus. So why not open a LISA now with the bare minimum (can be £1) just to get the clock ticking, in case you want to add to it later.Those with a Help to Buy ISA should definitely do this (you can have both; you just can't get the bonus on both). If you find you won't use your Help to Buy ISA this year, you can transfer it into a LISA with no issue before 5 April 2018. For more, see my Help to Buy ISA v Lifetime ISA video.

The Best-Buy Lifetime ISAs

I'm writing this on Tuesday evening, and so far only four providers, all stocks & shares firms, say they'll offer LISAs on Thursday. Not too helpful, as most first-time buyers want to save in cash as they're only putting money away for a short time - though Skipton Building Society has said it'll launch a cash LISA in June. In case someone surprises us on Thursday, rather than looking for best buys here, instead click our page which has up-to-the-minute info on shares & cash LISAs. If, as is likely, no cash LISAs are available and you need to get the clock ticking immediately, open a stocks & shares LISA now, with the minimum, and transfer it to a cash LISA when one launches. For full information, help & FAQs, see Top LISAs.

Of course tonight sees the end of the cash ISA year too, and tomorrow a brand new £20,000 cash ISA allowance. You can have a cash ISA with a LISA (but the total limit is still £20,000). Full help in Top Cash ISAs.

This article first appeared in the weekly email on 5 April 2017.

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