Savers looking to max out their ISA allowance ahead of the deadline today may want to consider an account offering a 25 percent bonus on deposits.
The Lifetime ISA is an account where you can save up to £4,000 a year with a 25 percent bonus on any deposits, up to £1,000 a year.
Karen Barrett, CEO and founder of financial advice group Unbiased, said the scheme is an “excellent option” for those saving up for a first home or for their retirement.
But she encouraged savers to read up on some key rules before signing up for the account. Ms Barrett said: “There are a few things to be aware of before you rush to open an account; for instance, you must be at least 18, but under 40, to open a LISA.
“When it comes to taking money out of it, it’s important to be aware of the 25 percent withdrawal charge, which you can only avoid if you’re 60 or over, buying your own home or are terminally ill.
“Not only would you lose your Government bonus, but you’d also lose part of your savings.
“So, you should ensure that a Lifetime ISA is right for you before opening an account. If you still have some ISA allowance left – use it or lose it.
“If you still have some ISA allowance left – use it or lose it. I’d urge everyone to consider maxing out their contributions before April 6 April if they can, or they’ll miss out on what is essentially free money.”
A person can save up to £20,000 into ISAs, which are tax-free with regards to any interest or growth on investments, or for any income derived from an ISA.
The current rules are you can save into one of each type of ISA but this is changing with the new tax year, when you will be able to save into more than one of the same type of ISA.
Ms Barrett said: “Your money is protected up to £85,000 if your bank, building society or credit union is covered by the Financial Services Compensation Scheme (FSCS) but, if you have more than this, you can save it with a different bank to ensure your money remains secure.”
At the time of writing, the top-paying Lifetime ISA according to moneyfactscompare.co.uk is with Moneybox, at 4.4 percent.
Another upcoming change ISA savers may want to note is the proposal for a British ISA, providing an extra £5,000 allowance. Funds in the new type of account will be invested in UK companies.
The new savings vehicle was announced in the Spring Statement with the plans currently under consultation, until June 6.
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