Up to now, I’ve been building up my own personal dividend portfolio in a stocks & shares ISA. The main reason for this is that any income or capital gains within an ISA is tax-free. Over the long-term, sheltering income and capital gains from the tax man can make an astronomical difference to an investor’s net wealth. Another advantage of a stocks & shares ISA is that the portfolio can be accessed at any time, providing a high level of flexibility. If I wanted to retire early, I could access the funds.
However, last week, after much consideration, I also opened up a lifetime ISA account to run alongside my stock & shares ISA. Here’s a look at why I opened a lifetime ISA.
25% investment bonus
The main appeal of the new lifetime ISA to me is the generous bonuses on offer from the government. Whatever you invest (up to £4,000), the government will add a 25% bonus. The bonus will apparently be paid in April.
A 25% risk-free bonus on my capital was too good a deal to turn down. If I continue to add to the ISA every year up to age 50 limit and receive the bonuses, the account should grow at a nice rate. I’ve invested the full £4,000 this year, so should receive a £1,000 bonus shortly.
I’ve had a decent pile of cash sitting on the sidelines for a while now, so figured that placing £4,000 within a lifetime ISA and earning the £1,000 bonus was a sensible investment decision.
I’m well aware that the capital needs to stay in the account until I’m 60, and that’s fine. I’m going to use this account as a retirement savings vehicle. I already own UK property so can’t use this account for a house deposit.
It’s worth pointing out that I currently work as a freelance consultant, therefore I don’t receive a company pension. I figure that the lifetime ISA offers a good alternative.
Lastly, I opened an account now, because I’m only just inside the 18-39 age requirements of the lifetime ISA. I’m 38 now, so thought I might as well open an account before I’m no longer eligible.
So, they are the main reasons I opened a lifetime ISA. To me, it looks like quite an effective retirement savings vehicle. Now, I just need to figure out how I’ll invest the £5,000.
This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.