The Treasury has announced the Lifetime Isa government bonus will be paid monthly rather than at the end of the tax year.
The Treasury published its Savings (Government Contributions) Bill earlier this month, which sets out in legislation how the Lifetime Isa will work in practice.
In a technical update released today, the Treasury says: “Isa managers will submit any claims for 2017/18 to HMRC after the end of that tax year. From 2018/19 the bonus will be claimed and paid on a monthly basis.”
Savers up to the age of 50 can deposit £4,000 each year into the Lifetime Isa and be eligible for the 25 per cent bonus.
The bonus is only paid on the amount paid in, not on interest or investment growth.
Aegon pensions director Steven Cameron applauded the Treasury for removing the “design flaw” of paying the bonus annually.
He says: “If the bonus had been paid only after the end of each tax year, some individuals who withdrew their funds mid-tax year could have faced a 25 per cent loss on contributions which had not benefitted from the Government bonus. We’re pleased the Treasury has removed this major design flaw.”
The FCA is expected to release a consultation for the regulatory framework for the Lifetime Isa in the autumn.