Help to Buy ISA

The Government has recently introduced a new scheme that will help first-time buyers get a step on the property ladder. The new Help to Buy ISA will be launched in autumn 2015 (exact dates to be confirmed) and offers savers a cash boost towards the cost of buying their first home.

If you or someone you know are considering saving into a Help to Buy ISA, here’s what you need to know:

How does the Help to Buy ISA work?

Save up to £200 per month and the Government will add a 25% bonus. It will also be possible to start the ISA off with an initial deposit up to £1,000, on top of which the Government will contribute 25% (£250 in this instance).

The scheme is open to first-time buyers and account holders must be over the age of 16. There is no income criteria so anyone can open a Help to Buy ISA providing they have never owned a house before.

Is there a minimum saving limit?

The minimum you need to save into the ISA is £1,600. The maximum contribution that the Government will make is £3,000 (on a £12,000 balance).

How can I open a Help to Buy ISA?

The new ISA will be made available through high-street banks and building societies, which will each set their own rates, as they do with normal cash ISAs. This means that you can also earn interest on your savings, as well as receiving the Government bonus.

You can only open one Help to Buy ISA, unlike a cash ISA which allows you to open one each tax year. You will, however, be allowed to continue saving into the ISA each tax year. You will also be permitted to transfer an existing Help to Buy ISA to a new provider, for example if interest rates drop with your current provider.

As the ‘one account’ rule applies per person, if you are a couple you could both open a Help to Buy ISA as individuals.

It’s important to note, you cannot save into a cash ISA and a Help to Buy ISA in the same tax year. So, if you’re thinking of opening a Help to Buy ISA when they are launched in the autumn, you would not be able to open a new cash ISA or deposit cash into an existing ISA after 6th April 2015.

When and how will I receive the bonus?

You will receive the bonus, in the form of a voucher that is sent directly to your mortgage lender, when you purchase your first home.

You will be able to use the voucher towards any residential mortgage deal, it does not necessarily have to be a Help to Buy mortgage.

Opening a Help to Buy ISA for your children

The minimum age for a Help to Buy ISA is 16 so you cannot open one for children under this age. If your child is over 16, you can encourage them to open one which you are then free to deposit cash into.

BLM Blogs are not meant, or designed, to offer personal advice; for advice in relation to your own situation, please contact us.

Who stands to benefit most from the changes to pensions?

Welcome to the second in our series of blog posts which aims to explain the upcoming pension reforms (due to come into effect April 2015) and the varied implications they might have. If you haven’t read our introduction to the 2015 pension changes yet, you can do so by following the link.

Up until recently people with Personal Pensions or Money Purchase Pensions reaching retirement age were faced with a decision of either taking an Annuity or leaving their money invested and taking income using a Drawdown type of arrangement. From April 2015 both methods will remain available but those not wanting to use either route can access the fund directly by taking a series of withdrawals.

Unlike an annuity, or a drawdown scheme whose income was capped, the new ways of accessing the pension fund will mean that people can make a conscious decision to run their fund down. For example, someone with a pension fund of £30,000 could opt to take £5,000 or thereabouts a year over 6 years thus fully exhausting the fund over that period. Some of this could be taken Tax free and some will be subject to Tax at the marginal rate.

It can be argued that those who have smaller pension funds will stand to gain the most, at least in the short term. The problem these people will have to overcome is the big question of ‘what happens after my pension fund runs out?’

Politicians seem to be suggesting that the new guaranteed minimum pension (to be introduced in the future) of around £148 per week will be enough for people to live on. But will it?

For those who seek to pass down their pension fund to their spouse, children or grand-children, the new rules will certainly help them achieve this goal but only when a suitable product is put into place.

From April 2015 the choices will be more varied. With choice comes complexity. With complexity comes risk; risk that the wrong decision could be made and in some cases this may be irreversible or at least costly.

For those seeking help and guidance with the options available to them when taking their pension, BLM’s ‘At Retirement’ service offers to guide clients through the options and complexities. Contact us for advice based on your individual circumstances.

The next post in our series of blogs about the 2015 pension changes will consider whether you can cash all your pension in (and buy a Lamborghini).

BLM Blogs are not meant, or designed, to offer personal advice; for advice in relation to your own situation, please contact us.