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Lifetime Isas

Find out how to open a tax-free lifetime Isa (LISA) and earn as much as £32,000 in free cash from the government.

In this article
What is a lifetime Isa? How does a lifetime Isa work? Cash lifetime Isa providers and rates Stocks and shares lifetime Isa providers and rates How do I open a lifetime Isa?
How much can I pay into a lifetime Isa? Can I withdraw money from a lifetime Isa? Can I transfer a lifetime Isa? Should I use a Help to Buy Isa or a lifetime Isa? The future of lifetime Isas

What is a lifetime Isa?

The lifetime Isa (LISA) is a tax-free savings or investments account designed to help those aged 18-39 at the time of opening to buy their first home or save for retirement.

It is the latest member of the Isa family, joining cash Isas, stocks and shares Isas, Junior Isas, Help to Buy Isas, and innovative finance Isas in an increasingly complex landscape for savers. 

Our short video explains the basics.

 

How does a lifetime Isa work?

When did lifetime Isas launch? They've been available since 6 April 2017.

Who can open a lifetime Isa? Adults aged 18-39, although if you're opening one to help save towards a property, you'll need to be a first-time buyer (i.e. never have owned a property before) if you're intending to buy the home before you turn 60.

What do I get? For every £4 you save, the government will add £1 up to a maximum of £1,000 every tax year until you turn 50 years old.

How much can I save? Up to £4,000 a year is eligible for the 25% bonus (you can add more but it won’t receive a government contribution).

When is the bonus paid? The bonus is paid every month, so that you benefit from compound growth (where you earn interest on your interest as well as the cash you've put in). 

Can I invest in stocks and shares? Yes, you can invest in either cash or stocks and shares.

Does this sit within my overall Isa limit? Yes, your overall annual Isa limit is £20,000 in 2021-22 and will include any payments into a cash Isa, stocks and shares Isa, innovative finance Isa, or lifetime Isa.

Can I spend the money on whatever I like? Under the age of 60 – no, you must use the cash to purchase a first property worth up to £450,000. After age 60 – yes, you can spend the money as you see fit.

Are withdrawals tax-free? Yes - as with other Isas, withdrawals are tax-free.

Are withdrawals penalty-free? It depends: if you use the money to purchase a first property or withdraw after the age of 60, you won’t be penalised. If you want to spend the money on anything other than your first property and you’re under the age of 60, you’ll be hit with a 25% penalty when you withdraw your cash.

Can I pass on my lifetime Isa to a partner? Yes, your spouse or civil partner can inherit the value of your lifetime Isa as an ‘additional permitted subscription’ (APS) allowance. Find out more in our guide to inheriting an Isa.

Cash lifetime Isa providers and rates

The table below gives an overview of all of the cash lifetime Isas currently on the market. For more detailed information, click on the list of providers below the table. Last updated: April 2021.

Provider AER How to open Does it accept Isa transfers? Other terms
Moneybox 0.85% Online Yes £1 minimum initial deposit
Newcastle Building Society 0.35% Online Yes, from other lifetime Isas £1 minimum initial deposit
Nottingham Building Society 0.6% Online and in-branch No £10 minimum initial deposit
Nude 0.5% Online Yes Costs £2 per month; must give 95 days' notice for withdrawals
Paragon Bank 0.5% Online Yes, from other lifetime Isas £1 minimum initial deposit; can be managed online, by post or telephone
Skipton Building Society 0.1% Online Yes £1 minimum initial deposit

More details:

 

Moneybox

 

The MoneyBox cash lifetime Isa pays 0.85% AER, and can be opened with just £1.

Savers who opened an account before 23 April 2020 will have their cash held by OakNorth Bank; accounts opened after this date will have savings held with Investec.

It's available nationwide, and accepts Isa transfers.

 

Newcastle Building Society

 

Newcastle's lifetime Isa pays 0.35% monthly.

The account requires a minimum initial deposit of £1.

You need to open the account online, and it is available nationwide. 

Newcastle Building Society has accepted transfers from other lifetime Isas since February 2019. 

 

Nottingham Building Society

 

Nottingham Building Society's cash lifetime Isa pays 0.8% annually. Savers must make a minimum initial deposit of £10 when opening the account.

Account holders with at least £500 saved who have held their account for 12 months or more will also gain free access to The Nottingham's mortgage advice services, which would cost non-existing customers £249.

The account can be opened both online and in The Nottingham's branches - it is the only provider to offer both of these options.

From September, the lifetime Isa will move over to a new app and website called Beehive Money. Nottingham says its 50,000 existing lifetime Isa customers will be notified of the change.

The move to Beehive Money also means new customers will not be able to apply for a lifetime Isa from the close of business on 16 August 2021 until September. Instead, new savers can join a waiting list for the app, so they'll be notified when it's up and running. 

While the current lifetime Isa does not accept transfers from any kind of Isa, the new version from Beehive Money will accept transfers from other lifetime Isas.

 

Nude

 

This account was rolled out gradually at the start of 2021 as part of the Nude app, which allows you to connect your bank, gives tips on how to save for your first home more quickly, and you can save jointly with your partner (if they're eligible).

The cash lifetime Isa requires £25 minimum initial deposit and pays 0.5% AER, and you must give 95 days' notice before making a withdrawal. 

After August 2021, you'll be charged £2 a month to use the features in the Nude app, which aim to help you save and budget for your first home. However, it does mean this is the only cash lifetime Isa that comes with charges.

You would not be able to make this back at the current rate of interest unless you had at least £4,800 saved in the account which, given the deposit restrictions, you could build up in just over a year.

The account accepts transfers.

 

Paragon Bank

 

Paragon Bank's cash lifetime Isa pays 0.5% AER.

The account can be opened with just £1, and while it must be opened online you can then manage the account online, by post or telephone.

It accepts transfers from other lifetime Isas and is available nationwide.

 

Skipton Building Society

 

Skipton Building Society's online cash lifetime Isa currently offers 0.1% tax-free interest, which is earned daily and paid annually on the anniversary of the account being opened.

The account can only be opened and managed online, and the first payment into the account must be by debit card, internal transfer from another Skipton account, or transfer (but not direct debit) from another bank or building society. 

You can also transfer Isa savings. After that, you can pay by cash in branch, cheque or standing order.

You can deposit anything between £1 and £4,000 each tax year, and there’s an offer to receive £250 cashback on a Skipton mortgage when you take out an online cash lifetime Isa.

No joint accounts are allowed.

Stocks and shares lifetime Isa providers and rates

The table below  gives an overview of all of the stocks and shares lifetime Isas currently on the market. As with all investments, there are risks involved, so you may get back less money than you put in.

For more detailed information, click on the list of providers below the table. Last updated: April 2021.

 

Provider Does it accept transfers? Fees Minimum investment Other terms
AJ Bell Yes Vary according to which type of investment you choose. Custody charge of 0.25% on shares and funds; charge per deal on buying and selling investments, from £1.50 for funds and regular investments online to £100 where a paper application is required; £25 plus VAT for CHAPS payments; £25 per holding for transferring out underlying assets £500 lump sum £25 minimum direct debit
EQi Yes, but only cash 0.2% custody fee; £9.99 ETF dealing commission; £10.99 share dealing commission; £35 CHAPS payments; £20 faster payment; £15 admin fee for overdrawn accounts, plus additional admin and postage fees £10 No custody fee to pay for the first two quarters
Foresters Friendly Society Yes 2% management charge £500 lump sum or £50 direct debit Savers get access to 'Foresters Extras' membership benefits
Hargreaves Lansdown Yes 0.45% annual account charge. May also be dealing charges for online and mobile app share dealing, telephone and postal share dealing, and income reinvestment £100 lump sum or £25 direct debit Has more than 2,500 funds to choose from, plus UK and overseas shares and investment trusts, bonds and ETFS. You can also hold cash
Metfriendly Yes 0.59% one-off entry costs; 0.15% portfolio transaction costs; 1.26% management costs £1,200-£4,000 lump sum or £100 direct debit For all serving, retired and former Metropolitan police officers or staff, and their immediate family
Moneybox Yes £1 per month subscription fee; 0.45% platform fee; 0.12%-0.3% fund provider fees £1 £25 transfer fee if you move to another lifetime Isa provider
Nude Yes £2 subscription fee; annual platform fee of 0.35%; 0.17% fee for the investment fund £25 Account must be opened and managed via Nude's mobile app
Nutmeg No Annual costs depend on which fund you choose and how much you have invested. Additional charges for investment fund costs and average market spread, which vary £100 Account must be opened and managed online or via mobile app
OneFamily Lifetime Isa transfers are not accepted, but other types of Isas are 1.1% annual fee £250 lump sum or £25 direct debit Only direct debit or debit card payments are accepted
The Share Centre (not currently accepting new customers) Lifetime Isa transfers are not accepted, but other types of Isas are 1.75% management fees £1 Not accepting new customers. You can deposit money via direct debit, cheque, phone, mobile app, debit card or bank transfer
Transact Yes but only via professional investors managing clients' portfolios. Individuals cannot make transfers themselves £3 quarterly wrapper fee of £3, plus additional fees if the account is part of a larger portfolio and charges for each transaction to buy or sell investments listed on or admitted to a stock exchange Not specified Operates via your financial adviser
Unity Mutual Yes No admin charges £1; £25 for direct debit Guarantees a return of 1.5%

More details:

 

AJ Bell

 

AJ Bell is an investment company offering a stocks and shares lifetime Isa.

Investment options include shares, investment trusts, unit trusts, gilts, corporate bonds and Open-Ended Investment Companies (OEICs). You cannot invest in warrants or private (unquoted) shares.

There's a range of investment tools, including videos, articles and research, on its website to help you decide what's right for you.

Alternatively, there's the option to invest in AJ Bell Passive funds (charged at 0.5% annually) - managed by a team of investment experts with five categories based on how adventurous an investor you are.

Fees vary according to type of investment, with a custody charge of 0.25% on shares and funds, a charge per deal on buying and selling investments ranging from £1.50 for funds and regular investments online to £100 where a paper application is required.

There are also charges for payments by Chaps (£25 plus VAT), transferring out underlying assets (£25 per holding), and disinvestment - i.e. if your holdings have to be sold to cover charges (£29.95 per holding).You can transfer cash from stocks and shares and cash Isas, as well as an existing lifetime Isa and Help to Buy Isa.

There's a mobile app, where you can access your account at any time and deal on the go.

 

EQi

 

Digital investing platform EQi's lifetime Isa currently offers the lowest custody or platform fee of 0.2%. However, there are a number of other fees you'll have to bear in mind.

The account accepts Isa transfers, as long as they're in cash. That means any investments must be sold before the cash is transferred in.

The minimum deposit is £10; you can either make one-off payments or set up a regular direct debit. You must make some kind of deposit during the first year of opening the account.

Government bonuses are automatically added to the rest of your savings once they're received each month. 

 

Foresters Friendly Society

 

Foresters Friendly Society is a mutual society.

Money is invested in the With Profits Order Insurance Fund, which aims to provide growth over five years or more. Annual and final bonuses may be added to the lifetime Isa by Foresters, depending on how much profit the fund makes - this isn't guaranteed.

The lifetime Isa is classified as medium risk, which Foresters classes as 'one which typically cannot predict the amount of money you may receive back'.

You can transfer money in from other Isas and savings.

A Market Value Reduction (MVR) may apply when you make withdrawals or fully cash in your lifetime Isa, even if you are over 60 or using the money to buy your first home.

Charges include an annual management charge of 2%.

It also offers 'Foresters Extras', including financial grants for education and healthcare, social and community events and Foresters Care - practical and emotional support from a personal nurse advisor for anyone with a serious medical condition.

 

Hargreaves Lansdown

 

Hargreaves Lansdown offers a stocks and shares lifetime Isa. You can open with a lump sum of £100 or start saving from £25 a month, and then choose your investments.

There are several investments to choose from, based on how long you’re planning to invest for and your attitude to risk.

You can manage your account through Hargreaves Lansdown’s app.

There are annual management charges for holding your funds: 0.45% on the first £250,000; 0.25% for funds between £250,000 and £1m; 0.1% for funds between £1m and £2m; no charge for funds over £2m.There may also be dealing charges for online and mobile app share dealing, telephone and postal share dealing, and income reinvestment.

Fees are taken monthly from your account. There is a ‘suggested minimum cash balance’ to prevent the chance of not having enough money in your account to cover the fees. If that does happen, you can add money to a Fund and Share Account, where fees will be collected if there aren’t enough in the lifetime Isa.

If there is not enough money in the Fund and Shares account, Hargreaves Lansdown will sell sufficient holdings to cover the amount owed, at a charge of £1.50 per deal if an automatic sale is required.

If you are unsure where to invest or wish to be out of the market, cash can be held in the lifetime Isa.

There are no inactivity fees, and funds from £5,000 upwards receive 0.05% interest.

 

Metfriendly

 

The Metfriendly lifetime Isa is for all serving, retired and former Metropolitan police officers or staff, and their immediate family – so it won't be suitable if you have no ties to the police.

The account is a stocks and shares Isa, and money is invested into Metfriendly’s With-Profits fund, which is made up of equities, commercial property, bonds and cash.

At the end of each calendar year, a bonus is usually added to investments, and if you invest for more than three years an additional final bonus is usually added when you cash in your investment. Bonuses depend on the return from the With-Profits fund.

Its terms and conditions say its 'intended retail investor' should deposit £100 a month or invest a lump sum between £1,200-£4,000. We have contacted Metfriendly to clarify whether this is mandatory and will update this guide once Metfriendly has confirmed.

You can transfer an existing Isa or lifetime Isa from another provider.

There are several fees to cover: a one-off 0.59% charge when entering the investment; ongoing charges of 0.15% portfolio transaction costs and 1.26% to cover ‘other ongoing costs’.

It’s been assessed as a medium-to-low risk account, but as always there is a chance that you may lose any money you invest.

 

Moneybox

 

MoneyBox is an app-based investment platform, with a stocks and shares lifetime Isa that invests money via three tracker funds.

These are split into ‘cautious’, ‘balanced’ and ‘adventurous’, each with a portfolio including a cash fund, global shares fund and property shares fund.

You must pay a subscription fee of £1 per month to use the app, plus a platform fee of 0.45% of what you invest per year. Plus there are fees from fund providers, ranging from 0.12% to 0.3% of your investment. You are able to transfer existing Isas into a MoneyBox Lifetime Isa, and you can also transfer a MoneyBox stocks and shares Isa into a MoneyBox lifetime Isa.

If you transfer your MoneyBox lifetime Isa to an alternative lifetime Isa, you will be charged a £25 administration fee.

 

Nude

 

Like the Nude cash lifetime Isa, this stocks and shares account was rolled out gradually at the start of 2021 as part of the Nude app, which allows you to connect your bank, gives tips on how to save for your first home more quickly, and generates payment links so friends and family can also contribute to your savings goal.

Your savings are invested with the BlackRock MyMap 5 Select ESG Fund.. 

The account has a £2 subscription fee, an annual platform fee of 0.35% and a 0.17% fee for the investment fund. The account accepts transfers.

 

Nutmeg

 

Nutmeg is a finance app/'robo advisor' that allows you to manage your investment portfolio through your phone.

With its lifetime Isa, your funds are invested in stocks and shares (mostly exchange-traded funds). Nutmeg helps you choose a portfolio based on your finance goals and attitude to risk.

There are four funds to choose from: Fully Managed, Smart Alpha, Socially Responsible and Fixed Allocation.

The Fully Managed Fund costs 0.75% up to £100k, 0.35% beyond, and is proactively managed by Nutmeg's investment team.

The Smart Alpha option costs 0.75% up to £100k, 0.35% beyond, and is managed by J.P Morgan Asset Management.

The Socially Responsible fund is proactively managed, but the portfolio is tilted towards funds with high environmental, social and governance (ESG) standards; it costs 0.75% up to £100k, 0.35% beyond.

The Fixed Allocation is cheaper at 0.45% up to £100k, 0.25% beyond.

Assets are reviewed once a year, but there's no intervention other than that.

All fees are taken directly from your account on a monthly basis.

The minimum investment is £100.

The option to transfer money held in other Isas to your lifetime Isa is not yet available with Nutmeg.

 

OneFamily

 

OneFamily offers two investment fund options with varying levels of risk.

The Global Equity Fund is for those looking to invest for over 10 years (so probably not first-time buyers), who are willing to accept a greater risk in the hope of greater overall returns in the long run.

The Global Mixed Investment Fund is suitable for those planning to invest for at least five years, with shorter-term goals. It’s less risky, so potential returns are lower.

Both funds invest almost exclusively in collective investment schemes. As markets can fluctuate, there’s no guarantee that you’ll get back the same value of money you initially invested.

There’s a 1.1% annual management charge, and possible administrative charges for cancelling and reissuing cheques, or issuing duplicate or additional statements.

To open the account, you need to either set up a £25 direct debit, or deposit a £250 lump sum.

Payments can only be made via debit card (made online) or from a regular Direct Debit from a UK bank or building society held in your name.

 

The Share Centre

 

Due to The Share Centre's merger with Interactive Investor, it is no longer accepting new customers for its lifetime Isa.

Existing customers' accounts will be transferred from Interactive Investor to OneFamily from 3 July 2021. 

Its Ready-made Lifetime Isa allows you to choose from its three funds - ‘cautious’, ‘positive’ or ‘adventurous’ - depending on your attitude to risk. The three funds can also be blended.

The funds include a wide variety of investments to make them as diverse as possible, but you can’t choose specifically what is included in each fund.

Due to the nature of investments, there are risks involved with all fund options – even if you go for the ‘cautious’ option there is still the chance that you will get back less money than you initially invested.

On opening a lifetime Isa, there are no dealing commission fees, no account admin fee or initial charges. There are, however, ongoing fund charges for managing the investment. These are set at 1.75% of your savings and are taken directly from your account. This means those with small investment amounts may be negatively affected.

You can pay into the account by debit card, cheque or Bacs/Chaps, and you can also set up a direct debit.

 

Transact

 

Transact offers a service for professional investors managing clients’ investment portfolios.

Its stocks and shares Isa requires a quarterly wrapper fee of £3, plus additional fees if the account is part of a larger portfolio and charges for each transaction to buy or sell investments listed on or admitted to a stock exchange.

Charges paid to your adviser or discretionary investment manager must be paid from outside your lifetime Isa account.

Cash can be held in the Isa without being invested, but this means you won't make any interest.

It is worth bearing in mind that the monthly government bonus is also paid in as cash, and without specific instructions to invest it, it will just sit as cash in the account.

 

Unity Mutual

 

Unity Mutual is the financial services brand of The Oddfellows friendly society.

This is a stocks and shares Isa, but pays a guaranteed return of 1.5% on all money paid into the account (this AER may vary).

The account has been classified as a three out of seven, medium-low risk.

Government bonuses are automatically invested with the rest of your savings once they're received each month.

This account accepts Isa transfers, and to open the account you'll either need to set up a direct debit for at least £25 a month or make an initial deposit of at least £1.

 

 

 

 

 

 

How do I open a lifetime Isa?

Once you've chosen a lifetime Isa provider, you'll need to apply to open an account with them directly. It's usually easiest to do this online.

You'll need to provide details like your name, date of birth, National Insurance number, address and other contact information so they can check you're a UK citizen and of the right age to be eligible for the account. You may need to verify your identity and address at a later stage of the application.

As with a regular Isa, you can hold multiple lifetime Isas at once. However, you can only open and pay into one lifetime Isa in each tax year.

You can also transfer money across from existing Isas. Any money you move across from previous years’ Isas will not affect your overall Isa limit for that year. 

How much can I pay into a lifetime Isa?

If you open a lifetime Isa you can still have a regular cash Isa, a stocks and shares Isa and an innovative finance Isa, as long as your overall contributions are within the annual Isa limit (£20,000 for the 2021-22 tax year). 

As with all other Isas, your money grows tax-free. 

Parents and grandparents can also pay into a lifetime Isa opened by their child or grandchild, which could be a useful part of inheritance tax planning

If you save the maximum £4,000 a year from age 18-50 you would receive £32,000 in government bonuses over the 32 years.

The bonus is paid on your contributions, not the overall amount saved. So, it doesn't matter what interest rate you earn if you open a cash lifetime Isa, or how your investment performs if you open stocks and shares lifetime Isa, as the bonus is paid on what you put in.

Can I withdraw money from a lifetime Isa?

You can put your lifetime Isa savings and bonuses towards a deposit on your first property or to help fund your retirement.

Here, we explain the different ways you can take money out of your lifetime Isa. 

After the age of 60

Once you hit 60 you can withdraw some or all of your money, including the government bonus, to spend as you see fit. Withdrawals are tax-free.

When buying your first home

You can withdraw some or all of your money at any time after 12 months as long as you're using it to buy your first home, and not a buy-to-let property. The property must be based in the UK and not cost more than £450,000. Withdrawals are tax-free. 

Lifetime Isas are limited per person, not per home - so if you’re part of a couple, you can both open a lifetime Isa and benefit from the government bonuses before buying a property together. 

Unlike with Help to Buy Isas (which are no longer open to new applicants), you can use both your lifetime Isa savings and the government bonus to put down a deposit once you’ve exchanged contracts. The Help to Buy Isa only pays the bonus after completion, so it can't be used as part of your initial deposit to secure the property. 

If the purchase falls through, or you don’t use the cash to buy your home within three months after the withdrawal, the money must be returned to the lifetime Isa by your solicitor.

Under 60 and not buying a home

If you're aged under 60 and withdraw money for any reason other than buying your first property, you will face a 25% penalty on the amount withdrawn. 

This means you'll lose more than just the government bonus; you'll also lose 6.25% of your own money.

The only exception to this is if you're diagnosed with terminal ill health, in which case you can withdraw all of the funds (including the bonus) tax-free and penalty-free, regardless of age. 

Can I transfer a lifetime Isa?

Officially, you are allowed to transfer your lifetime Isa between providers. This should take no longer than 30 days. 

However, several providers do not currently offer this service, so you should check beforehand.

It's also possible to move money from a lifetime Isa to another type of Isa. However, this counts as an unauthorised withdrawal, meaning you'd have to pay the 25% penalty if you did this.

Should I use a Help to Buy Isa or a lifetime Isa?

Help to Buy Isas are no longer available to new applicants, but if you have an existing account you can continue to save (and benefit from the 25% bonus) until December 2030.

This advice is for people who hold an existing Help to Buy Isa.

If you want to buy within the next year and haven't opened a lifetime Isa yet, stick with your Help to Buy Isa as funds can only be withdrawn from a lifetime Isa after 12 months.

Otherwise, a lifetime Isa may be worth considering, as you can save more money and earn a bigger bonus.

You’re also not limited by a monthly deposit cap: with the Help to Buy Isa you can only save £200 per month, but with the lifetime Isa you can add cash as a lump sum. 

A lifetime Isa bonus can be used towards a more expensive property. With the Help to Buy Isa, you can only buy a house worth up to £250,000 (or £450,000 in London), while the lifetime Isa allows you to buy a home worth up to £450,000 anywhere in the UK. 

You can transfer money from your Help to Buy Isa to a lifetime Isa, but this will count against the lifetime Isa contribution limit for that year.

You can also choose to open a lifetime Isa alongside a Help to Buy Isa. However, you can only use the government bonus from one of these accounts to buy your first home. 

The future of lifetime Isas

The government is debating whether to let people borrow funds against their lifetime Isa without incurring a charge, as long as they repay the money in full. 

It may also decide that money within a lifetime Isa can be withdrawn without charge for other specific life events, in addition to buying a first home. 

But neither of these things are possible right now.

You can find out more about lifetime Isas in our news article, which explored the product's popularity, pitfalls and potential future: is there life in the lifetime Isa?

 

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