Well yesterday was the Budget and it seems the government wants to encourage saving. I don’t want to get political and the thing I want to comment on is the new Lifetime ISA.

It sounds good in principle as the government will pay an annual bonus of 25%.  I.E. if you make the maximum contribution of £4,000 then the government will add a further £1,000.  This is a huge growth by anyone’s standard.  Presumably there will also be interest on the ISA accounts as has been the case with the Help to Buy ISAs.  This would compound to make the whole idea very appealing when comparing it to the other methods of investing.

There are some limitations to the new Lifetime ISAs as they are only available to those under forty and contributions can only be made up to the age of fifty.  Furthermore, it seems you can only get the bonus if you save for a house or for retirement.  If saving for retirement you cant withdraw the money until 60.

I do wonder whether it will discourage people from other investments, particularly private pensions.  They may feel the new ISA is all they need due to the government bonus.  It may also put people off riskier investments because they can get such high growth in what is essentially a bank account.

Overall I think it seems a good scheme and I will definitely be making use of it when it becomes available in 2017.  My plan is to first invest as much as I can up to the £4,000 limit to maximise the bonus.  I would then invest any remaining money in stocks or property as I currently do.  I hope this new scheme succeeds and encourages more people to save for their future.

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