How are your finances looking? What are you putting away for the future? With more of us living for longer, we need to figure out our pots of cash ahead of potential retirement. Maybe you’ve been paying into a lifetime ISA for a while. Perhaps the money you have invested has grown more than you thought it would do. Have you been asking yourself when can I withdraw from my LISA?
What IS A LISA?
Firstly, we need to touch on what a LISA actually is. It is a savings account designed for those between the age of 18 and 39, called a lifetime ISA. You can put £4,000 into a LISA each year and it still makes up part of the £20k you can put into ISAs every year. However, one of the main benefits is that the Government top it up by 25%. So if you max it out with £4k each year, you’ll actually be saving £5k due to the 25% from the Government. The money in the account can be used for a first home or retirement.
Different Types Of LISA
There are two different types of LISA. One of them is simply a cash ISA. This will have a basic interest rate so you can be sure that your money is growing year upon year. You’ll also be protected up to £85k in each financial institution. There is also a Stocks & Shares LISA for those who want an element of risk. This is where your money could grow a lot more every year, as it is being invested in the stock market. You can usually choose your level of risk. But as with all investments, you could get out more than you put in.
When Can I Withdraw From My LISA?
This is the question you click on this blog post for. When can I withdraw from my LISA? Well, this depends on what you are withdrawing it for.
If you are using it for your first home, you must have had the account for longer than 12 months. You must be buying a first property that is valued at up to £450k. You must also be buying with a mortgage.
For those choosing to use their LISA for retirement, you can access the money after your 60th birthday. When you take out your savings they’ll be tax-free, fee-free and ready for you to use in your retirement. If you choose to access this money before your 60th birthday, you’ll pay a fee of 25%. The same happens should you choose to transfer the contents of your LISA to a different type of ISA.
What Happens If I Die?
If you were to pass away before you accessed your LISA, the LISA would finish on your date of death.
Any money in your lifetime ISA, including interest and bonuses, would be passed onto your beneficiaries, without any penalty. It would lose its tax-free status and form part of your estate, which would be subject to Inheritance Tax.
Final Thoughts
LISAs are a great way to save for a first home as you can get a Government boost. They can also be a great way to save for retirement. Be sure to seek independent financial advice should you need it and remember that investments can go down, just as they can go up. Do your own research and be sure that the product you are opening is ideal for you and your financial situation.
