If I contribute £4k, the government will contribute a £1k bonus.

If in 5 years £4.4k has the same relative value as 4k does now (based on inflation), would I be able to pay in £4.4k and get £1.1k, bonus or would it still be limited to putting in 4k a year to get the 1k bonus?

  • What does the first sentence have to do with the rest of the body of the question? – RonJohn Jun 8 '19 at 22:02
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    @RonJohn it summarises the terms of a Lifetime ISA – AakashM Jun 11 '19 at 8:09
  • Is that a hypothetical example (because 25% interest seems Really High)? – RonJohn Jun 11 '19 at 11:47
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    @RonJohn It's not interest, it's a government top up. You can pay in up to £4K per year, it gets a 25% bonus. – richardb Jun 11 '19 at 12:27
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    @RonJohn Essentially it allows you to save tax-free (like pensions) but over a shorter term (if used toward buying your own house). Example figures: you take £1,000 of your gross earnings, on which you'll have paid £200 in taxes (20%). If you put the remaining £800 in a Lifetime ISA, the government gives you back the £200 you paid in taxes (which is 25% of the £800 you paid in). So effectively you're saving from pre-tax money. – TripeHound Jun 11 '19 at 15:12

The Lifetime ISA has existed for 2 years. In each of those years the annual limit has been £4000 and the bonus has been fixed at 25% in each period too.

The government could change both the limit and the bonus in the future but have announced no plans to automatically index link either. ISAs have existed for much longer and their limits have changed over time, those limits have also never been explicitly index linked, they change (or not) whenever there is a budget.

A treasury select committe has even called for the abolition of Lifetime ISAs saying their complexity is too high and their uptake rate too low, so there's no guarantee they will even exist in the long term.

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