IPSE cautiously welcomes the incoming Lifetime ISA (LISA)
IPSE has welcomed the introduction of the Lifetime ISA (LISA) for young freelancers but cautions that penalties mean it’s not for everyone.
The LISA, which the Government will make available on 6 April, has two intended purposes – saving for retirement or buying a property. It’s a tax-free net around your savings up to a maximum of £15,240 in 2016/17 and will be available to everybody aged 18 to 39.
There is a maximum deposit rate of £4,000-a-year until the age of 50. The state will add an additional 25 per cent bonus upon withdrawal, after the age of 60. There is a 25 per cent penalty on any withdrawals made before then.
The average age of freelancers today is 47, outside the eligibility bracket. IPSE would like to see the maximum age threshold increased so that a significant proportion of the self-employed workforce doesn’t fall outside the eligibility bracket.
IPSE is also calling for removing or lowering the financial penalty to accommodate for self-employed variable income.
Lorence Nye, IPSE Economic Policy Adviser, said: “There has been a long-term saving crisis for the self-employed for some time. The new Lifetime ISA, therefore, is certainly a step in the right direction and the young self-employed, in particular, would be wise to take advantage of it.
“However, It’s not for everybody. Self-employed incomes are variable and people should be aware of the large 25 per cent penalty for removing finances.
“The self-employed have volatile irregular incomes so a penalty-free withdrawal would alleviate the significant penalty if they do need to access the money.”