What is a Lifetime ISA?

The Lifetime ISA (LISA) is a new type of ISA introduced by the government in April 2017, which is aimed at helping younger people buy their first house and/or save for retirement.

Not only do investments in LISAs benefit from the same tax-free status as any other ISA, the government will top up payments you make with an additional 25%. So for every £100 put into a LISA, the government will put in £25.

The maximum you can pay in to a LISA is £4,000 per tax year, although payments into LISAs can count against the overall £20,000 ISA subscription limit, so be careful not to exceed that too.

You’re able to open a LISA if you’re 18 years of age or over and under 40, although you can continue paying in until you reach your 50th birthday.

You can use the money you save in a LISA to buy a house up to the value of £450,000 so long as you are a first time buyer and are buying with a mortgage. You can also use the LISA to save for retirement – you’ll be able to access the money tax-free from age 60.

If you do need to access the money for any reason other than buying your first home, at age 60 (for retirement) or in the case of terminal illness, you will have to pay a 25% charge on the money you take out. This means that for every £100 you withdraw (£80 plus the £20 bonus), £25 would be deducted and you would get back £75, so LISAs may not be for everyone. You should also be aware that if you save in a LISA rather than enrolling in a qualifying scheme, occupational pension scheme or personal pension scheme, you may lose the benefit of contributions by an employer (if any) and future entitlement to means tested benefits may be affected.