The government has published its Savings Bill covering the details and bonuses to those taking out the Lifetime ISA from April 2017.

The Bill confirms individual’s annual contributions of £4,000 per year while receiving a 25% government bonus when funds are put towards retirement or a first property.

The bill seems to indicate that the government intends to stick with its original plan for Lifetime ISA providers to claim the bonus for individual savers at the end of each tax year. 

The bill also confirms that the government bonus plus interest or growth on it will be removed, and an additional 5% penalty levied if savers withdraw their funds before 60 or under any circumstances.

Savings can be withdrawn tax-free to purchase a first home of up to £450,000 or after the age of 60. 

Nigel Holland from Holland & Co Chartered Accountants said:

 “ It is encouraging that the government is helping individuals to establish financial stability in later life. Therefore, Lifetimes ISA’s, whereby individuals who save £4,000 per year are awarded a 25% government bonus.

However, the stringent rules in relation to the bonus criteria may need to be re-considered.

For example, the bonus will be displaced if any individuals save more than the £4,000 limit, which may be harsh for those who are in a position to save more.

This seems quite hypocritical, as on the one hand the government wants people to save, yet on the hand, if they save too much then they will be penalised.

Therefore, the government may need to revise the bonus criteria.”