Back in May, we shared a post about Chancellor George Osborne’s announcement of a new Lifetime ISA, due to be launched in April 2017.
Here’s a quick refresh of the basic features:
- The maximum contribution would be £4,000 per annum
- The Lifetime ISA is available to those between the ages of 18 and 39
- Returns would be free of UK income and capital gains tax
- Funds could be used to purchase a first home or left until your 60th Birthday
- The government would provide a 25% bonus on contributions
The lifetime ISA attracted criticism due to its complexity, lack of detail, punitive penalties and the belief the true impact of the savings policy was hidden.
The Financial Times said “they could tempt millennial workers from company pension schemes, causing them to lose the benefit of employer contributions and tax relief”
The Telegraph said the LISA was all about trying to grab votes by suggesting “ministers decided to target a group of voters not seen as natural Conservative supporters”
Some pension firms were concerned the LISA would leave people at risk of being poorer in old age. The Guardian reported “[the] best way to save for retirement will still be via a workplace pension [and] there was a huge risk that the new accounts would discourage some under-40s from joining their workplace pension scheme”
Many pension firms called for the launch to be delayed due to insufficient details about how the LISA would work and how it would be regulated.
Six months later
In early September the government published a Bill to legislate for LISA bonuses. A few days later it then issued an “updated design note” setting out a number of technical changes to Mr Osborne’s original idea.
The aim remains to launch LISA next April, and the document outlines the fact that The Financial Conduct Authority (FCA) will publish a consultation this autumn on the regulatory framework for the lifetime ISA.
What does the future hold for the Lifetime ISA?
The new Chancellor Philip Hammond will deliver his first Autumn Statement speech to Parliament on Wednesday 23 November. With increased speculation that there may be a revival of the pensions tax relief cuts that his predecessor scrapped, we’ll be first to bring you the facts.