He likes to work a crowd does our Gideon. To be fair, it’s his big moment of the year. The key note speech. The one time people will generally sit and listen to him with only a modicum of heckling. But even at that he was outclassed and upstaged. Between Theresa May’s cleavage and the dulcet tones of the deputy speaker, we’re left wondering if he had any idea how far his audience was drifting off. If not, a quick check of the #Budget2016 thread on Twitter should clarify things for him. Certainly those of us who were poised in a cat like (natch) state of readiness for the merest mention of anything to do with pensions and/or tax relief had started to wilt after well over an hour of high speed train links, bridge toll cuts and the sugar tax. Which, let’s face it, is all anyone is going to be talking about.
But then, right at the very end, when we would have given up and returned the office Sonos system to questionable tunes except for the fact that we know better, there it was.
Hello, Lifetime ISA. It sounded pretty interesting at first. Lots of perked ears and “oh, that could be it for pensions this time” and the like. Not to mention questions over how it will impact auto-enrolment. And then came the detail in the form of a one page fact sheet.
Lifetime ISAs launch in April 2017 and will be available to anyone over 18 and under 40.
You can invest up to £4,000 per year until you hit 50 and get a 25% top up from the government (or 20% tax relief on the total sum invested depending on how you look at it).
You can use it towards a first home purchase (Help to Buy ISAs can be transferred in) or for retirement savings. Which is where the shine starts to fade a little.
If you want to use it for a first home, fine. Take it and enjoy browsing John Lewis for kitchenware, just go easy on the Cath Kidston.
What about retirement then?
To recap, you get your 25% (ish) from the government for any funds deposited before you hit 50. And then you get to stare longingly at your ISA statements for the next decade. You can keep contributing but there will be no more government funded top-ups. And if you want to get up close and personal with your savings before the age of 60, it’ll cost you in the form of a 5% exit penalty. Oh, and the government bonus.
A couple of things spring to mind here. Not least of which is the theme of another recent blog.
- Pension freedoms – yes, remember that? The thing where by you can access your retirement fund from the age of 55 without incurring an unreasonable penalty. The government feels so strongly about the unreasonable penalty aspect it has instructed the FCA to introduce a cap on early exit fees. According to FCA data around 147,000 of those eligible to access the freedoms (3-4%) would face a charge of 5% or more. Leave that one there shall we?
- This is exactly the sort of high jinks (but better) that everyone has spent the last however many years trying to beat out of the industry. And now the chief thrower of stones has seen fit to move into a large and rather ornate greenhouse.
This was heralded as the ‘surprise’ of the Budget. Perhaps I have unrealistic expectations of ‘surprises’ but you play with the toys you are given and we’ve been given the Lifetime ISA. Let the games commence.