I'm learning hard and fast. All things money and all things investment.
Today I came up with a gem - how to get £1,000 a year free from the UK Government every year until you are 50.
All you have to do is to get to know LISA.
To encourage people to save the UK Government in 1999 introduced ISAs or Individual Savings Accounts.
These are special arrangements that allow people to put a certain amount of money each year (currently £20,000) into different types of investments.
The big advantage of ISAs is that any interest and gains made are free of all taxes when taken out.
Initially there were two types of ISA - Cash ISAs and Stocks and Shares ISAs.
Other types of ISA were subsequently launched including in 2016 the Lifetime ISA or LISA.
The Lifetime ISA is particularly targeted at younger people to encourage them to save for their first house, or to save for retirement.
To make LISAs particularly attractive the Government gives a 25% bonus on contributions of up to £4,000 a year. So if someone puts in the maximum £4,000 allowed into their LISA they will get £1,000 free from the Government.
UK citizens aged from 18 to 39 are allowed to open LISAs. Annual contributions with the 25% bonus are allowed up to age 50.
If an 18 year old opens a LISA and puts in the maximum £4,000 per year until they are 50, they will get £32,000 of free annual bonus payments from the Government.
Money can only be withdrawn from a LISA without penalty for buying a first home (up to £450,000), or after reaching age 60, or if you are terminally ill and have less than 12 months to live.
If money is withdrawn from a LISA at any other time there is a penalty of up to 25%.
The 25% annual bonus, as well as the usual ISA tax free status, makes LISAs a must for any young person in the UK saving for a first home.
For retirement saving the situation is a little more complicated as standard pensions have their own set of tax advantages. The main difference is that pension contributions are tax free when made, but pension payments are taxed as income when taken.
For LISAs the tax treatment is the opposite - not tax free on input, but totally tax free on output.
LISAs can be Cash or Stock and Shares.
One of the best Cash LISAs on offer at the moment appears to be the one offered by The Nottingham which is giving 1.05% annual interest...
Companies such as AJ Bell and Hargreaves Lansdown are among those offering Stocks and Shares LISAs...
For more information about Lifetime ISAs check out the UK Government website...
And articles from MoneySavingExpert...
Please note, I am not a financial expert and this is not financial advice. Do your own research and seek professional advice if needed.
[ image from pixabay.com ]
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