The Government has announced it will scrap the much-criticised 5 per cent penalty fee for those who cash in a Lifetime individual savings account (LISA) during the first year. While it’s good that politicians are listening to criticism of the new product, any extra complexity is always a barrier to consumer understanding. And don’t forget that half of savers in the UK don’t even know what ‘ISA’ stands for*.
The LISA – a complex hybrid between a pension and an individual savings account – is due to launch in April, and yet the Government is still making up the rules as it goes along. It could be revolutionary, but the new product has not been properly thought through.
What is it?
The LISA will allow those aged at least 18 and under 40 to save up to £4,000 a year and receive a government bonus of 25 per cent.
The bonus, which is capped at a maximum of £1,000 a year, must be used either towards a deposit for a first house or for retirement.
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