2016 Budget - ISA changes

Hibernator

It's bad enough turning 40 this year, but now even the gov says I'm not young anymore :-(
I'll be 40years and 8 months by April 17 when the 'Lifetime ISA' scheme starts, so I miss out by 8 months.
8 months mean I potentially won't get £10,000 (+interest) of free money from the gov between age 40-50. I don't think I've ever qualified for any gov benefits (except college tuition fees) or free money, and it looks like I've missed out again!
I guess my question is, "Is it right or legal to discriminate on the basis of age like this". Some one aged 35 now will continue to benefit from this scheme when they are 40 and beyond, so why can't I ?
Until recently, AFAIK, schemes for (retirement) saving have been open to all adults from 18 (up until the age of retirement).

ZacharyB

What is the interest rate? I get that you receive £1000 in bonus if you put in £4000 a year, but after that what do you get?

jamesd

ZacharyB wrote: »

What is the interest rate? I get that you receive £1000 in bonus if you put in £4000 a year, but after that what do you get?

Whatever the account provider or your investments pays.

jamesd

Hibernator wrote: »

I'll be 40years and 8 months by April 17 when the 'Lifetime ISA' scheme starts, so I miss out by 8 months.

Note though that the minimum age to withdraw for this is to be 60, older than the current 55 for pensions. This means you won't be able to use it to fund the first part of early retirement if you're committed enough to doing that to be able to do it as early a that.

Look into VCTs if you want 30% repeated every five years.

Ed-1

ZacharyB wrote: »

What is the interest rate? I get that you receive £1000 in bonus if you put in £4000 a year, but after that what do you get?

It's similar to a savings account which includes a bonus.

e.g. Lloyds HBOS TSB Bank offers an account paying 4% interest with a 25% bonus paid on 5th April if you haven't withdrawn during the tax year. Restrictions are you can only put £4,000 a year in and can't withdraw until you buy a house or reach age 60 or lose the entire bonus payments.

HelenLH

This was my first reaction too. I'm 43 and I don't understand why I don't have the option to benefit from these ISAs. Surely this can't be legal - it's totally abitary!

jamesd

Age distinctions like this one are legal. Don't worry about it, pension or VCT investing are both likely to be better deals for current typical pension pot sizes and unlike ISA money the pensions are not exposed to loss due to benefits means tests.

Initially the Lifetime ISA belongs:

1. For home buying
2. Pension is safer and beats it for the first part of anticipated retirement income, the part that will be within the personal allowance, because it's protected from means tests and bankruptcy and all withdrawing in this range is also tax free.
3. At risk of loss to means tests or bankruptcy the Lifetime ISA can be used above that level of pension investing but note the minimum age 60 for withdrawing.
4. Pension still can benefit more from employer matching or maybe salary sacrifice but employers might change this in the future.

zagfles

jamesd wrote: »

Age distinctions like this one are legal. Don't worry about it, pension or VCT investing are both likely to be better deals for current typical pension pot sizes and unlike ISA money the pensions are not exposed to loss due to benefits means tests.

Initially the Lifetime ISA belongs:

1. For home buying
2. Pension is safer and beats it for the first part of anticipated retirement income, the part that will be within the personal allowance, because it's protected from means tests and bankruptcy and all withdrawing in this range is also tax free.
3. At risk of loss to means tests or bankruptcy the Lifetime ISA can be used above that level of pension investing but note the minimum age 60 for withdrawing.
4. Pension still can benefit more from employer matching or maybe salary sacrifice but employers might change this in the future.

Yes they really need to clarify whether it'll be protected from capital rules in means tested benefits. If it isn't, then it's a pretty useless retirement savings vehicle as you could lose your entire "pension" if you lose your job and are unemployed for a while.

chiram2015

Interesting budget for investors but I just wonder with the higher ISA limits that the banks will offer a higher interest rate if you transfer & max out - alas pipe dreams by me probably!

I see the Retireeasy team have flagged up a possible conflict between LISA as they have called it and workplace pensions. Here's the link if anyone's interested:

https://www.retireeasy.co.uk/news/blog

I'm off to buy some doughnuts before the sugar's removed !!

Nekaro

One question I have. On the money saving expert article regarding this it states "if you take the money out before you're 60 without buying a first home, you get no bonus and there's a 5% penalty on the amount you withdraw"

However there is a statement in one of the previous paragraphs or the MSE article seems to contradict this and I'm confused!!

It states "When withdrawing money, any bonus for that tax year will be paid at the point of withdrawal".

Why does it say bonus will be paid when withdrawing when the previous quote states that you forfeit the government bonus, and pay 5% for the privilege, if money withdrawn before 60yrs of age?

Any ideas? Am I misreading this?