Investing the Lifetime Isa: my latest cover piece for FT Money

IMAGE COPYRIGHT: Charlie Bibby/FT

In my latest extended cover piece for the Financial Times Money section, I get to grips with the Lifetime Isa. It’s a government initiative that launched two years ago, ostensibly to help people save either for their first property or for their retirement.

Much like the Help to Buy Isa, it comes with a 25 per cent bonus from the government on whatever you save. But the Lifetime Isa not only allows you to save more – up to £4000 a year – it also gives you the option to either save your money on deposit or invest it.

Conventional wisdom suggests that first-time buyers should stick to cash while those looking at the Lifetime Isa as a pension top-up (or substitute, in the case of self-employed people) should put their money in stock markets. But home-savers are starting to ditch cash and take greater risks with their money to (try and) earn a better return.

In my piece, I look at three ways to invest the Lifetime Isa depending on your goals and attitude to risk. I hope you find it helpful!

Iona Bain

I stare at my screen with mixed feelings. I can’t quite believe the sum now sitting in my Lifetime Isa: over £10,000. I’m proud that I have managed to squirrel away so much in two years. But I also feel daunted. All that money, sitting in cash, doing nothing. What next? Welcome to the world of the young “Lisa” investor.

Since its launch two years ago, the Lifetime Isa has opened a new financial avenue for thousands of young people like me.

If you’re aged between 18 and 39, you can use the Lifetime Isa to save or invest up to £4,000 a year. You’ll then receive a 25 per cent annual bonus from the government on whatever you put away to help fund your first home or later life — all free of tax.

But it has not been without controversy. The Lifetime Isa has been labelled by some as little more than a taxpayer-sponsored trust fund for wealthy families. It was recommended for the scrapheap by MPs last year, and is only offered by a minority of providers. The complex rules surrounding how the product can be used are also off putting.

Nonetheless, 286,000 people have signed up since its launch in April 2017, including me and my musician brother Matt — young professionals on middle incomes, trying to manage our money for ourselves. Many use the Lifetime Isa to save for a first home, but as we already own a flat together, we intend to use our Lifetime Isas as a long-term investment — although we have very different risk appetities.

FT Money has assembled a team of experts to assess the various options available.

Click here to read the rest (no paywall)…

PLUS: Make sure you listen to the FT Money podcast, where I chat to the legendary Claer Barrett.

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