It’s not very often that free money comes along but from 6th April 2017 the Government will introduce the Lifetime ISA. If your child is somewhere between 18 and 40 and hasn’t yet purchased their first home then any savings into this new scheme will attract 25% additional funds from the Government. Where else can you get a good return like this? The maximum amount the Government will put in is £1,000 per year (based on contributions of £4,000). The first home must be purchased before the age of 50. If two young people are saving up to buy a home together then they would both get this top up as it is per person not per home. Studies have shown that more and more parents are dipping into their own savings to give their child some help with a deposit to buy their first home, so consider starting early and making yearly contributions into your child’s Lifetime ISA and securing this free money. For example if funds of £4,000 per year are put in for the next three years and then the amount available for a deposit to buy a first home would be £15,000. The lifetime ISA can also be used for saving for retirement instead of/in addition to buying a home, this can only be withdrawn after the age of 60 tax free. However, taking out the funds before the age of 60, other than using to purchase a first home, will mean the loss of the Government’s contribution and a 5% penalty.
