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. For more on how to pass on an Isa, see our guide to inheriting an Isa.
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 easiest to do this online through their website.
You'll usually 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 are 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.
- Find out more: how to buy a house
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 does not mean you'll only lose out on the government bonus; the penalty means you'll also lose 6.25% of your own money, in addition to losing the bonus.
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 should be able 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 2019 article, which explored the product's popularity, pitfalls and potential future: is there life in the lifetime Isa?
Lifetime Isa providers and what they offer
There are currently 16 lifetime Isa providers on the market, offering either cash or stocks and shares investment options.
Skipton Building Society cash lifetime Isa
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.
Nottingham Building Society cash lifetime Isa
The cash Isa option from Nottingham Building Society has 0.8% tax-free interest, paid annually. Savers must make a minimum initial deposit of £10 when opening the account.
Account holders 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.
No transfers from any kind of Isas are accepted into this account.
Newcastle Building Society cash lifetime Isa
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 began accepting transfers from other lifetime Isas in February 2019.
The Share Centre stocks and shares lifetime Isa
The Share Centre has a Ready-made Lifetime Isa, where you can choose for your money to be invested into one of 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.
Nutmeg stocks and shares lifetime Isa
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.
Each portfolio is diversified across different assets, countries and industry sectors.
There are two options: a fully managed portfolio, which is managed by the investment team and incurs a larger fee (0.75% up to £100k, 0.35% beyond), or a fixed allocation portfolio which is cheaper to maintain (0.45% up to £100k, 0.25% beyond) but has no ongoing management.
There are also charges for investment fund costs and effect of market spread, which can vary.
All fees are taken directly from your account on a monthly basis.
The minimum investment is £100.
As with all investments, there are risks involved, so you may get back less money than you put in.
The option to transfer money held in other Isas to your lifetime Isa is not yet available with Nutmeg – this includes the transfer of a Help to Buy Isa.
Hargreaves Lansdown stocks and shares lifetime Isa
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 happens, 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.
As your funds are being invested, there are risks involved and you could end up with less money than you put in.
Paragon Bank cash lifetime Isa
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.
MoneyBox cash lifetime Isa
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.
MoneyBox stocks and shares lifetime Isa
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 0.22% to 0.24% of your investment.
You are able to transfer existing Isas (including Help to Buy 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.
There is an element of risk involved when investing money, and you may get back less than you initially put in.
AJ Bell stocks and shares lifetime Isa
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 types 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.
As returns on investments are not guaranteed, you could end up with less money than you first put in.
Foresters Friendly Society stocks and shares lifetime Isa
Foresters Friendly Society is a mutual society that offers a stocks and shares lifetime Isa.
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 1.25% and portfolio transaction costs of 0.12%.
It also offers 'Foresters Extras', as opening the account makes you a Foresters member. These include 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.
OneFamily stocks and shares lifetime Isa
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% annual management charge, plus you’ll have to pay up to 0.3% for an investment expenses charge.
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.
Transact stocks and shares lifetime Isa
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 of your lifetime Isa account.
Cash can be held in the Isa without the need to be invested, but with no interest it won’t grow.
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.
As this is an investment product, there is a chance that you won’t get back as much money as you invested.
Metfriendly stocks and shares lifetime Isa
The Metfriendly lifetime Isa is for all serving, retired and former Metropolitan police officers or staff, and their immediate family – so it’s not suitable for the general public who 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.
It’s for those who wish to start saving at least £100 a month initially, to invest a lump sum between £1,200-£4,000, or to transfer an existing Isa or lifetime Isa from another provider.
The terms and conditions list these figures to describe the ‘intended retail investor’, and it’s not clear if these minimum payment amounts must be stuck to.
There are several fees to cover: a one-off 0.6% charge when entering the investment; ongoing charges of 0.12% portfolio transaction costs and 1.74% 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.
Unity Mutual stocks and shares lifetime Isa
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.
EQi stocks and shares lifetime Isa
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 do 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.
Nude cash lifetime Isa
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 generates payment links so friends and family can also contribute to your savings goal.
The cash lifetime Isa pays 0.1% AER, and you must give 95 days' notice before making a withdrawal.
The account also costs £2 a month, which covers the cost of the other features in the app. 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 £24,000 saved in the account which, given the deposit restrictions, would take six years to save. Therefore, this charge will eat into your savings/government bonus.
The account accepts transfers.
Nude stocks and shares lifetime Isa
Nude's other lifetime Isa product is a stocks and shares investment option.
Your savings are invested with the BlackRock MyMap 5 Select ESG Fund, and you must give at least 30 days' notice when you want to make a withdrawal.
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.