Compare Lifetime ISAs - LISA | moneyfacts.co.uk

Lifetime ISAs

  - Also called a LISA, these tax-efficient ISAs offer a 25% Government top-up to help you save for a first home or for retirement
 

The Lifetime ISA (or LISA) offers a tax-free wrapper with a maximum £4,000 a year allowance, with the Government giving you a 25% top-up until you're 50.

Learn more about Lifetime ISAs »

Nutmeg Lifetime ISA

Account Type:
Stocks and Shares ISA
Min Investment:
£100 lump sum
Fees: Management fees of 0.25% to 0.75% depending on how much you invest. There are also underlying charges, please see our fees page.

Further Information:

Get an intelligent stocks & shares Lifetime ISA portfolio - Choose a portfolio that’s fully managed by Nutmeg's team, or one designed to remain steady and rebalance automatically.

  • No tie-ins, no set-up fees, no exit charges.
  • Easy, online set up in minutes.
  • Start with as little as £100 up to £4,000.
  • Management fees of 0.25% to 0.75% depending on how much you invest. There are also underlying charges, please see our fees page.
  • Plus, live chat, helpful customer support and really useful investor tools and guides.
Nutmeg are authorised and regulated by the Financial Conduct Authority and are covered by the Financial Services Compensation Scheme. Capital at risk. Lifetime ISA rules apply.

Hargreaves Lansdown Lifetime ISA

Account Type:
Stocks and Shares ISA
Min Investment:
£100 lump sum or £25 per month
Fees: 0.45% base, plus £25 + VAT exit fee and £25 to transfer out.

Further Information:

In the HL Lifetime ISA you can invest in the stock market to grow your money and potentially reach your goals quicker. Although investments can go down as well as up so you could get back less than you invest. Benefit from:

  • Peace of mind – choose the UK’s leading investment platform, already trusted by over 876,000 clients with £70 billion
  • Expert guidance – see the latest research and investment ideas from our experts to help you choose from a range of investments.
  • Easy to manage – keep up-to-date with your investments online or using our new app for mobile
  • Great value – no set-up or transfer-in charges, no charges for buying or selling funds, low cost reinvestment service and an annual fee of just 0.45% or less

One Family Lifetime ISA

Account Type:
Stocks and Shares ISA
Min Investment:
£25 direct debit or £250 lump sum required to open your account
Fees: 1% annual management charge and Up to 0.3% Investment Expenses Charge.

Further Information:

The OneFamily stocks and shares Lifetime ISA could be a great way to save towards purchasing your first home or for topping up your savings for later life after the age 60.
If you're aged between 18-39 you can open a Lifetime ISA, subject to eligibility criteria. Until age 50, for every £4 you invest, the government tops it up by £1, that's a 25% government bonus. If in the current tax year, you invest the maximum allowance of £4,000, you will get the full £1,000 government bonus.

With OneFamily you have:

  • A simple fund choice - one designed for shorter term (at least 5 years) and one for long term saving (at least 10 years)
  • Easy to switch between funds, free of charge
  • A simple 1% annual management charge, please refer to product documents for details of other charges
  • Easy to apply and manage online - at your fingertips 24/7.

This is a capital at risk product, so the value can fall as well as rise. Lifetime ISA rules apply.

 

On this page:

  1. What is a Lifetime ISA?
  2. Age restrictions and eligibility
  3. How do Lifetime ISAs work for retirement savings?
  4. How do Lifetime ISAs work for first-time buyers?
  5. Why should I get a Lifetime ISA?
  6. Penalties
  7. Can I move my Lifetime ISA to another provider if the rates are better?
  8. Can I open and contribute to another ISA and a Lifetime ISA?
  9. How many Lifetime ISAs can I have?
  10. When will I get the Government bonus?
  11. Alternatives to the LISA

What is a Lifetime ISA?

A Lifetime ISA, simply put, is a type of tax-free savings account (ISA stands for individual savings account) that allows you to save for retirement or your first home, or both (as long as you leave the minimum required investment amount in a LISA, you can keep it open after buying a home). While it comes with a lot of restrictions, it has the benefit of a generous Government top-up.

You can put up to £4,000 a year into a Lifetime ISA, and get a 25% bonus from the Government (which from 6 April 2018 is paid monthly), resulting in a maximum of £1,000 a year extra. As you can open such an account at the age of 18 (until you're 39) and the Government will add a 25% bonus until the age of 50, this means that you have the potential to earn a maximum bonus of £32,000.

Note that you only receive the bonus on the savings you put in, not on any investment growth or interest that is accumulated, but that you will be able to make gains on the bonus amount. The compounding effect means this could soon add up, which is why it benefits everyone that since 6 April 2018 the bonus is paid on a monthly basis.

Age restrictions and eligibility

You can open a Lifetime ISA if you're a UK resident (or Crown Servant) aged between 18 and 39 years old. There are no other restrictions to open one, although it would be best to make sure you won't need the funds you put in for any reason other than saving for retirement or buying a first home. This ensures that you don't end up having to retrieve your money and paying a penalty, which we'll cover below.

How do Lifetime ISAs work for retirement savings?

When it comes to retirement saving, you can withdraw the money in the account at any time after the age of 60, to use however you like, although the LISA is designed specifically to support people in retirement. You don't have to take it all out at once - you can make partial withdrawals to supplement your income, for example. Any money you leave in could still grow/gain interest and remains tax exempt.

Although the Government bonuses stop once you reach 50, and you're also no longer able to add additional funds after that time, you'd still gain interest (or potential investment gains) on your savings during the 10 years you'd have to wait to gain access to your pot. You'd also still be able to move your funds between Lifetime ISA providers to benefit from better rates.

How do Lifetime ISAs work for first-time buyers?

While you simply have to be 60 to gain access to your LISA for retirement purposes, withdrawing the funds for a house purchase is a little more complicated. First of all, you really have to be a first-time buyer, so you can't already own a home (even as buy-to-let) or commercial property anywhere in the world. Second, the home you buy must be in the UK and worth at most £450,000, purchased with a mortgage and for you to actually live in (though you may be able to rent out the property at a later date).

You and your partner can both be first-time buyers with your own LISAs, and both funds will count, but the property still can't be worth more than £450,000. Furthermore, you will have to have held the Lifetime ISA for at least 12 months to get the bonus.

There'll be no tax to pay, as the money will go straight to a conveyancer or solicitor. The funds will be used at exchange, with the purchase needing to complete within 90 days of the savings being withdrawn (if the purchase falls through, the LISA savings will be returned to your account). Talk to your solicitor or conveyancer beforehand to make sure your LISA funds are eligible and how to arrange for them to be used (don't withdraw the cash yourself as you'd be penalised, as explained below).

Why should I get a Lifetime ISA?

If you're looking to buy your first home in the next few years, or simply want an additional way to save for retirement, and don't mind locking away £4,000 per year for your future, then a Lifetime ISA might just be for you. While pensions are still the best way to save for later life, an extra £1,000 a year is certainly nothing to be sneezed at.

Additionally, you won't have to pay any tax on the money that is in an ISA, and you'd earn interest or make potential investment gains on the bonus as well as your own savings over the years, which could all add up. Of course, once you reach 60 and take money out of the ISA, you will become liable for taxation depending on what you do with the money.

One potential negative when it comes to Lifetime ISAs is that most providers currently only offer a stocks and shares LISA, with only one cash Lifetime ISA (as of April 2018) currently available. This means that unless you can open an account with that sole provider, you would have to invest your annual £4,000 in the stock market and risk the possibility of negative returns, albeit for the potential of much higher gains.

The good thing about the LISA's access restrictions, in combination with the stock market, is that investments tend to do best over the long term. This means that, unless you are planning to take the money out of the Lifetime ISA in a year's time, the long-term benefits could outweigh the risks. This is down to personal preference, however, and your attitude towards risk.

Penalties

Anyone who withdraws cash from their LISA without being at least 60 or terminally ill with less than 12 months to live (remember that for a house purchase, you don't withdraw the funds yourself - your solicitor arranges the transfer for you) attracts a penalty. Specifically, the Government subtracts 25% from the money you take out.

This may seem like the Government simply taking back their bonus, but it actually goes beyond that. Not only would you lose the entire 25% bonus, you would also effectively lose 6.25% of your own investment. That's because 25% of £1,000 (which would be your own investment in this example) is a smaller amount than 25% of £1,250 (your investment plus the Government bonus). So, only invest in a Lifetime ISA if you're confident you won't need to take the money back at any point other than for a first home or retirement.

Can I move my Lifetime ISA to another provider if the rates are better?

Yes. While you may not want to take the money out of the LISA given the penalty involved, you can transfer your funds between LISA providers without restriction. This means you wouldn't be stuck with your original Lifetime ISA provider forever, and you'd be able to take advantage of the best Lifetime ISA rates. Remember, however, that you will need to follow the proper transfer procedure to ensure your savings remain penalty and tax-free.

Can I open and contribute to another ISA and a Lifetime ISA?

There are four types of ISA: the cash ISA, stocks & shares ISA, innovative finance ISA and Lifetime ISA. You can only open one new ISA of each type per tax year. There's nothing stopping you from opening all four types of account, however, for instance by putting the maximum amount in a LISA and the rest of your annual ISA allowance in a cash ISA (or a stocks & shares ISA, an innovative finance ISA, or split between the different types).

For the 2018/19 tax year, the ISA limit is £20,000, which means that if you put the maximum in a Lifetime ISA, you would still have £16,000 to distribute between the other types.

How many Lifetime ISAs can I have?

You can have as many as you'd like, but you will only be able to open and pay into one per tax year. This effectively means that you'll only get the Government bonus paid on one of your LISAs, but it also means you wouldn't be able to benefit so much from the effects of compound interest on your accumulated savings. Particularly for the purposes of buying a house, it would be much simpler to have your savings combined in a single Lifetime ISA; your solicitor/conveyancer might not even accept multiple accounts.

When will I get the Government bonus?

The Government's generous 25% bonus is calculated and added to your LISA on a monthly basis (from 6 April 2018). This does not, however, mean that you will be able to access it. As stated, the Government bonus gets paid directly through the solicitor when buying a house, and subtracted (plus a penalty) if you decide to take your money out before the age of 60 unless you are terminally ill. You will only see the bonus yourself once you're 60 and your Lifetime ISA cash becomes fully available.

Alternatives to the LISA

If you're not sure you want to lock your money away, but you'd still like to save up for a first home with the help of a Government bonus, there's the Help to Buy ISA to consider. These accounts also come with a 25% bonus, but allow penalty-free withdrawals. The reason for this is because the bonus doesn't get added to the account until your solicitor files the paperwork while you're completing your first house purchase, so withdrawing funds would not give you access to the bonus anyway.

Note that the Help to Buy ISA scheme closes to new savers on 30 November 2019, and that you'd only be able to use the bonus from either a Lifetime ISA or Help to Buy product for a house purchase, not both. You can, however, open a Help to Buy ISA from as young as 16 (but you won't be able to open both a cash and Help to Buy ISA in the same tax year).

Others, who may be reluctant to stash their cash in a Lifetime ISA and aren't interested in saving for a first home, could choose a stocks & shares ISA instead. If you're already 40 or over such an account could provide decent returns over the next 15-20 years to help you save towards your retirement. For the risk-adverse, there are of course plenty of cash ISAs or even non-ISA fixed rate bonds to consider. Remember, however, that there is no substitute for a workplace pension when it comes to tax-free retirement saving, so don't neglect it.

Further Information

To learn more about Lifetime ISAs, please read our guide. If you're not sure whether you'd prefer a Lifetime ISA or a Help to Buy ISA, there's a guide that compares the two for you.

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