The question is from Anne, 55
My 26-year-old daughter is earning around £24k/pa. She is saving towards a home deposit but as yet doesn't have a pension. I have a small amount, around £4k, that I can give her to kick start this process and she is willing to add to this each month. We're interested in finding out the best way of doing this.
Answer by Alistair Beckett, CFPTM Chartered FCSI, Proprietor, John Roddick & Son
Since the daughter is below the age of 40 she qualifies to contribute up to £4000 per annum to a Lifetime ISA. The government will add 25 percent per annum to the contributions which she makes up to a maximum of £1000 per year. This enhancement is however withdrawn if funds are taken from the ISA for a purpose other than house purchase or retirement at or beyond age 60.
Although the duality of the purpose of the LISA fits the client's circumstances the restrictions concerning use of the funds may become a problem if for example funds are required for another use. It may, therefore, be that the client prefers to retain complete flexibility through use of a standard ISA which would allow tax-free growth whilst permitting contributions of up to £20000 per tax year with no early withdrawal penalties.
At this stage of the client's investment career, the possibility of cash and/or stocks & shares exposure provides a useful introduction which can be built upon as the client's funds and experience allows.
Details of a financial planner close to you are available on cisi.org/wayfinder