Helping first-time buyers get onto the property ladder

If you’re thinking about saving for your first home and in need of a little financial boost, our Lifetime ISA could be just what you’re looking for.

Unity Mutual’s Lifetime ISA enables young people aged 18-39 to save up to £4,000 a year towards their first home and receive a 25% bonus from the government.

In addition to the government bonus, we’re offering customers an interest rate of 1% on top of their savings and a further 0.25% to those who take out a Lifetime ISA before 5 April 2019.

Whilst saving with Unity Mutual you will have the reassurance of your money being fully protected as well as the security of free life cover. This could be either 101% of the value of your account or £5,000 (subject to Terms & Conditions).

The Unity Mutual Lifetime ISA is a great option if you’re struggling to get onto the property ladder and in need of a little extra help.

How it works

The Lifetime ISA is available to anyone aged 18-39 who is a first-time buyer living in the UK (or a Crown employee working overseas).

All you need to do to get started is set up a direct debit of £25 a month or invest a lump sum of £250. There is no set time for how long you can have your Lifetime ISA open for.

Each month you make a payment into your Lifetime ISA you will receive a 25% government bonus on that amount. We do all the hard work to ensure you get your Government bonus. You can get hold of your savings at any point even if you’re not ready to buy however you will incur a 25% government withdrawal charge.

When you’re ready to withdraw your Lifetime ISA funds to buy your first home, all you need to do is let your conveyancer know. They will then provide Unity Mutual with a declaration and we’ll pay the amount requested.

If the purchase of your property doesn’t complete, your conveyancer will return your funds to us and Unity Mutual will continue to invest them on your behalf until you’re ready to buy again.

We can’t give you any advice on whether our Stocks & Shares Lifetime ISA is right for you. We can only give you factual information.

If you are considering using your Lifetime ISA to save for retirement please see to the FAQ's below for more details.

At a glance

  • Available to those aged 18-39 who are looking to save up for their first home
  • Invest up to £4,000 per tax year and receive a 25% bonus from the government
  • Receive an interest rate of 1% on top of your savings and a further 0.25% if the Lifetime ISA is taken out before 5 April 2019
  • Free life cover, which could be either 101% of the value of your account or £5,000 (subject to Terms & Conditions)
  • 100% capital protection
  • Set up a direct debit of £25 a month or a lump of £250 to get started
  • Get hold of your savings at any point, however with a 25% government withdrawal charge
  • Details
  • FAQs

Please read through these documents to make sure the Stocks & Shares Flexible ISA is right for you.

Q.1 What is a Lifetime ISA and who might it be suitable for?

The Lifetime ISA is a type of Individual Savings Account which has been designed to encourage those under 40 to save for a first home or for retirement. To encourage saving the government will give you an extra £1 bonus for every £4 you pay put in.

You can withdraw to help pay for your first home under £450,000 or tax-free from age 60.

Our Stocks & Shares Lifetime Individual Savings Account (Lifetime ISA) provides you with an easy to access, tax-efficient way of saving/investing your money to take advantage of this bonus.

A Lifetime ISA should not be used as a general savings vehicle, as most withdrawals would result in the loss of the government bonus and a penalty.

A Lifetime ISA may be suitable for:

Saving towards your first property

If you are saving towards your first home, the full value of the Lifetime ISA can be withdrawn at any time at least 12 months after the first contribution has been received into the Lifetime ISA.

In addition, if the home is being bought with another first time buyer they can also invest in a Lifetime ISA to benefit from the Government bonus.

Note: You should bear in mind that over the mid to long term (5-10 years and over), inflation is likely to erode the purchasing power of your investment.

Saving for retirement

If you wish to save for your retirement you can contribute into a Lifetime ISA up until age 49. You can then withdraw some or all of the funds from the Lifetime ISA without incurring a penalty from your 60th birthday.

Note: If you wish to use a Lifetime ISA to invest for your retirement you should first ensure that your employer subscribes the maximum contributions to your workplace pension. If you are unsure about your pension provisions you should speak to your employer or seek advice from a financial adviser.

Warning: if you save in a Lifetime ISA instead of enrolling in, or contributing to, a qualifying scheme, occupational pension scheme or personal pension scheme:

  • you may lose the benefit of contributions by an employer (if any) to that scheme; and
  • your current and future entitlement to means tested benefits (if any) may be affected.
Q.2 Who can open a Lifetime ISA?

The eligibility rules to open a Lifetime ISA require that:

  • you are aged between 18 and 39, and
  • you are resident in the UK, or a Crown employee (or their spouse/civil partner) working overseas.

You cannot hold a Lifetime ISA with, or on behalf of, someone else.

You can subscribe to a Lifetime ISA until age 50.

Q.3 How does a Lifetime ISA work?

The most that can be paid into a Lifetime ISA for the current tax year is £4,000 and this forms part of the overall ISA contribution limit of £20,000 for the current tax year.

You can split your ISA allowance for a tax year across the different types of ISA, but you can only have open one of each type in the tax year.

For example, you could:

  • Invest £4,000 in a Lifetime ISA;
  • Invest £6,000 in a Cash ISA; and
  • Invest £10,000 in a Stocks and Shares ISA

Your Lifetime ISA does not close when the tax year ends, you can choose to continue investing in that one or open another. Either way your savings will retain their tax-free basis for as long as you keep them within your Lifetime ISA.

Q.4 How much can be invested?

Once a Lifetime ISA is open, you can invest up to the annual contribution limit (currently £4,000) into it each year until your 50th birthday.

Contributions can be made in a number of ways;

  • regular monthly payments by direct debit, contributions can be stopped or changed at any time without penalty
  • payments by cheque - made payable to ‘Unity Mutual’ with your name and ISA number on the back
  • payments by direct money transfer – ensuring your ISA number is quoted in the transfer
  • through the website https://www.unitymutual.co.uk/customer-centre/make-a-payment/
  • by calling the office on 0161 214 4650

The minimum initial investment is a single contribution of £250, or, £25 by monthly direct debit payment.

Minimum additional one-off contributions of £25 can also be made at any time.

In choosing to invest in a Lifetime ISA you should consider your lifetime ISA subscription level and choice of qualifying investment in relation to your savings objectives, your expected investment horizon and your financial circumstances as a whole, including other provision for retirement.

You should also note that these factors may change over time and that you should regularly review your Lifetime ISA subscription and/or qualifying investments.

Q.5 What about tax?

All investment growth generated by Lifetime ISA investments is exempt from income tax and capital gains tax for UK residents. The proceeds of the Lifetime ISA will be tax free as long as you are resident in the UK.

Tax rules and legislation relating to the Lifetime ISA may change in the future. The information given here is based on our understanding of the current situation at the date of publication. If you have any queries or concerns about your personal tax position we recommend you consult your local tax office or an IFA.

Q.6 Can I transfer my Lifetime ISA?

Lifetime ISAs can be transferred between ISA managers and any transfer must be done within 30 days of an account holder’s request.

To transfer a Lifetime ISA you hold with another organisation to Unity Mutual you need to complete our Transfer Authority Form.

When we receive your application form we will contact the other provider once any cancellation period has expired.

To transfer a Lifetime ISA from Unity Mutual to another provider, you should contact them to make arrangements. Once they contact us with the necessary paperwork we will transfer your funds to them.

If, when funds are transferred, there are outstanding government bonuses, it is up to the new ISA manager to claim the bonuses due on the transferred funds from HMRC.

Transferring to a Lifetime ISA from different types of ISA

If the funds transferred to a Lifetime ISA are from a different type of ISA, the value transferred to the Lifetime ISA will count against the Lifetime ISA contribution limit but not the overall ISA limit for the tax year.

Partial transfers of ISA contributions from previous years are permitted. However, for transfers containing contributions in the same tax year, the contributions must be transferred in full up to the Lifetime ISA limit of £4000.

Transfers from a Help to Buy ISA

A Help to Buy ISA is a government scheme that was also designed to help you save for a mortgage deposit to buy a home which had similar, but more restrictive, characteristics than a Lifetime ISA.

If you transfer from a Help to Buy ISA to a Lifetime ISA the transfer will count towards the Lifetime ISA contribution limit for that tax year. Funds transferred from your Help to Buy ISA will be eligible for the government bonus.

Note: if you do transfer your Help to Buy: ISA, you will have to wait 12 months after you make your first contribution to the Lifetime ISA to withdraw the funds for a house purchase.

Q.7 How are the Government bonuses paid?

The Government bonus will be received each month after a contribution has been received.

Q.8 How is the interest applied?

Interest is earned on a daily basis.

Interest rates are set in March each year for the next tax year. The reasons for changing the interest rate could be:

  • To enable us to respond to changes in the return on the underlying investments, either in relation to the past or expected future returns;
  • Changes in the economic environment, including market volatility in bond, equity and property markets;
  • To enable us to respond to actual or reasonably expected changes to the cost of running our business;
  • To protect the financial strength of Unity Mutual, in the interest of all our customers; or;
  • To reflect, where appropriate, changes in market rates on other financial services products

This list is not exhaustive, and is only intended to give an example of the type of reasons that might result in changes.

Where interest rates are changed we will give you notice as follows :-

  • Where we reduce an interest rate and the balance of your account is £100 or more, we will give you at least 14 days’ prior written notice;
  • If we increase an interest rate we will notify you via our website as soon as possible following the increase.
Q.9 Can I make withdrawals from my account and will there be a charge?

Authorised withdrawals

Withdrawals for the purchase of your first home or for retirement are known as authorised withdrawals, they are not penalised, but can only be made 12 months after the first contribution has been received.

You can make an authorised withdrawal for a house purchase if:

  • the value of the house being purchased with a mortgage is less than £450,000;
  • it is your first property — if you have previously owned all or part of any property the withdrawal will not be authorised and will incur a penalty; and
  • the property is in the UK

In order to make an authorised withdrawal for retirement you must be aged 60 or over.

You may also withdraw from your Lifetime ISA if you are terminally ill.

Unauthorised withdrawals

As the Government wants to encourage saving, if you need to make a withdrawal for any other reason from a Lifetime ISA, a withdrawal penalty will be imposed.

A withdrawal penalty of 25% of the withdrawal amount will be made for all unauthorised withdrawals.

You should understand that:

  • the lifetime ISA government withdrawal charge recovers any lifetime ISA government bonus and any investment growth on that bonus plus an additional amount; and
  • if the lifetime ISA government withdrawal charge is incurred, the retail client could receive back less than they paid in.

Unity Mutual does not set the charge, and does not benefit from it, it is returned to the government.

For example, if you invest £4,000 and then received the government bonus of £1,000, the value of your Lifetime ISA will be £5,000. If you then withdraw the whole £5,000, a government charge of £1,250 (25%) will be taken, meaning you will only receive £3,750.

Q.10 What might my Lifetime ISA be worth when I reach age 60?

The table below is designed to help you understand what the value of a lifetime ISA might be at age 60, depending on the age at which you start saving and assuming the maximum annual subscription at the beginning of each tax year up to age 50 and receipt of the lifetime ISA government bonus.

It provides information if you are saving for retirement in a lifetime ISA and so may not be relevant to someone whose saving objective for a lifetime ISA is house purchase; 

1

Age saving in lifetime ISA started

2

Total amount paid in by lifetime ISA saver/investor

3

Total amount paid in, plus lifetime ISA government bonus 

4

Estimated outcome at age 60 from 0% return 

5

Estimated outcome at age 60 from 5% return 

6

Charges and estimated inflation would reduce a 5% return to

18 £128,000 £160,000 £85,289  £315,886 2.5% 
25 £100,000 £125,000 £71,920  £224,089 2.5% 
30 £80,000 £100,000 £60,853 £167,584 2.5%
25 £60,000 £75,000 £48,331 £117,641 2.5%
40 £40,000 £50,000 £34,164 £73,499  2.5%

 

The estimated outcomes in Columns 4 and 5 are based on standardised rates of return which may not reflect:

  • actual or expected returns; or
  • the choice of qualifying investment for a lifetime ISA (further information can be found in Q.10); and

include the effect of lifetime ISA charges and inflation on estimated outcomes from a lifetime ISA

Column 6 shows the effect of Lifetime ISA charges and inflation (assumed to be 2.5%) on the returns from a Lifetime ISA which you can use to compare the lifetime ISA charges applicable to other lifetime ISAs and charges applicable to longer-term savings products.

As our Lifetime ISA Property Fund, unlike other Stocks & Shares Lifetime ISAs, has no management charges; these have not been included.

Q.11 Where is the money invested?

The money is invested by Unity Mutual in a mixture of investments such that we are able to provide you with a guaranteed return over each tax year. 

The guaranteed return can vary, and will be informed to you in advance of each tax year. 

The underlying investments used by Unity Mutual will change at our discretion and can include cash, government bonds, corporate bonds, equities, property and other assets that we might deem appropriate from time to time.

Q.12 How do I keep track of my investment?

We will issue a statement annually which will show the value of your Lifetime ISA.

You can also contact us at any time to ask for the current value.

Q.13 What happens when I want to buy a house?

In order to withdraw funds from your Lifetime ISA without a penalty for a house purchase:

  • your Lifetime ISA must have been open for 12 months;
  • you must be a first time buyer of a residential property with a purchase price of not more than £450,000;
  • the property purchase must be funded by a mortgage (or equivalent) not cash; and;
  • you must occupy the property as your only or main residence (unless you are unable to do so because you are an overseas crown servant, the spouse of an overseas crown servant, or you are waiting for the property to be built)

In order to withdraw the funds you will need to tell your conveyancer you wish to use part or all of your Lifetime ISA and you will have to provide them with a declaration.

Your conveyancer will then need to provide us with a declaration. Once this has been received, we will pay the amount requested directly to the conveyancer within 30 days.

If the purchase of your property does not complete the conveyancer will return the monies to us and we will reinvest them on your behalf.

Q.14 What happens if I want to buy my first home with my partner?

You can each use Lifetime ISA savings to buy your first home, provided you both meet the eligibility criteria.

If only one of you meets the eligibility criteria, for example, if one of you already owns a property, then only the person who meets the criteria can use their Lifetime ISA funds.

Q.15 What happens to my Lifetime ISA if I die?

We will provide guaranteed life cover of £5,000 provided there is a commitment to contribute at least £1,000 pa over next 5 tax years.

Your Lifetime ISA ceases on the date of your death. Any bonus due will be claimed and the amount that can be claimed will be calculated as the greater of 101% of the value of the fund held within the Lifetime ISA and the guaranteed life cover.

There is no government charge on death and, there will be no Income Tax or Capital Gains tax to be paid to that date, but the value of your ISA will form part of your estate for the purposes of Inheritance Tax.

Any questions?

If you would like more information about the Lifetime ISA our customer service team is available to discuss any questions you have, just give us a call on (0161) 214 4650 (9am to 5pm Mon to Thurs and 9am to 4pm Friday)

Or email insure@unitymutual.co.uk

If you need financial advice

If you’re in any doubt about whether this product is right for you, it’s a good idea to talk to an Independent Financial Advisor (IFA). You can find a local financial advisor by phoning IFA Promotion on 020 7833 3131 or via www.unbiased.co.uk. You may need to pay for a financial advisor’s help, so make sure you ask them about their fees first.

Terms and conditions apply to our Lifetime ISA. For more information read the product’s Terms & Conditions and the Lifetime ISA Key Information Documents.

Ready to apply?

If you’ve read through everything and you’re happy our Lifetime ISA is what you’re looking for, let’s get your application started.

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