Posted by admin - March 31, 2016 10:25 am Changes to ISAs from 6 April 2017

What are the changes?

From April 2017, a new lifetime ISA will be open to adults aged between 18 and 40. Individuals will be able to save up to £4,000 per year and will receive a 25% bonus from the Government on every pound that is saved.

Taxpayer contributions

The taxpayer will be able to make contributions and obtain the bonus until the age of 50. They will be able to buy a first home at any time after the account has been open for at least twelve months or withdraw funds for use in retirement tax-free from the age of 60. Withdrawals for any other purpose will lead to the bonus element of the fund, plus any interest or growth on it, being returned to the Government and a 5% charge will also be applied. There will be a limit of £450,000 to the value of a property that can be bought using lifetime ISA money.

Help to Buy ISA

The help-to-buy ISA which is already in existence will continue until November 2019. It will be possible to hold both types of ISA during this period but only one account can receive the bonus from the Government. During 2017/18, funds held in a help-to-buy ISA can be transferred to a lifetime ISA in addition to the £4,000 annual limit.

ISA limit

The overall ISA subscription limit will be increased to £20,000 with effect from 6 April 2017.

It would appear that the above changes may introduce a new way of saving for a pension for the under-40s and perhaps pave the way for more fundamental changes to pensions in the near future that many had been predicting in the weeks leading up to the Budget on 16 March 2016.