What is a Lifetime ISA?
A Lifetime ISA (LISA) is a new way for younger investors to save for their first home or retirement. For every £4 you put in, the government adds £1 – up to a maximum bonus of £1,000 per year.
At a glance
- Lifetime ISAs can be opened by savers aged 18 to 39
- Contribute up to £4,000 p.a. into a LISA until you turn 50
- Receive a 25% government bonus on what you pay in (up to £1,000 p.a.)
- Withdraw money tax-free to buy a first first home, or from age 60
So a saver who puts £4,000 yearly into a Lifetime ISA from the age of 18 will get a generous £32,000 bonus, before any interest or growth (assuming these limits and LISA rules are unchanged).
Important information: A Lifetime ISA is not for everyone. If you withdraw money, other than to purchase your first home or before age 60 you will pay a government withdrawal charge of 25%, which will recover the annual bonuses paid by the government to your LISA. This may mean you get back less from your LISA than you paid in. Also, if you choose to save in a Lifetime ISA instead of enrolling in, or contributing to, your workplace pension scheme you will miss out on the benefit of your employer’s contributions to that scheme and your current and future entitlement to means tested benefits may be affected. Read more on Lifetime ISA risks and the key features document.
The benefits of our Lifetime ISA
- Low-cost – deal from £1.50 and never pay more than £9.95 per online deal.
- Easy to manage – access your account online 24/7 and deal on the go with our mobile app
- Regular saving – invest as little as £25 per month into your LISA
- Customer support – we’re here to help and answer your queries with a UK-based customer services team, webchat and email support
- Investment ideas – we can help you select and manage your portfolio with our AJ Bell Passive funds and Favourite funds list. You also get access to a range of investment tools including videos, articles and research
Accessing your Lifetime ISA
You can withdraw your money from a LISA without paying the government withdrawal charge:
- When buying your first home – you can use some, or all, of your LISA to buy a home up to the value of £450,000, as long as you’re a first time buyer and buying with a mortgage. If you’re buying with a partner, both of you can save with a Lifetime ISA and receive the bonus.
- From age 60 onwards – once you reach the age of 60 you can withdraw your entire LISA tax-free and spend it as you like.
If you have a terminal illness, you can withdraw all the money in your LISA without paying the government withdrawal charge. If you choose to withdraw money from a Lifetime ISA in any other circumstances, you’ll have to pay the 25% government withdrawal charge. This may mean you get back less than you originally saved.
Is a Lifetime ISA right for me?
With its generous government bonuses, a Lifetime ISA is a great way to save for a first home or later life. But if you plan to access the money for any other reason, you may want to consider investing instead into a stocks and shares ISA, or cash ISA.
If you’re looking to save for retirement, you may want to consider a Lifetime ISA alongside a pension. You should carefully weigh up whether you want to save into a LISA instead of enrolling in a workplace pension scheme if it means losing the benefit of employer contributions. Your current and future entitlements to mean-tested benefits could be affected too.
Need help choosing your investments?
Choosing the right investments for your LISA can be daunting – thankfully, our AJ Bell Favourite funds list is here to help. It’s our pick of the best funds for medium to long-term growth or providing income. With our handy filter tool, you can create a shortlist of funds, letting you research and pick the right fund for your portfolio. Or if you’d prefer to leave it all to the experts, our AJ Bell Passive funds are even more effort-free.
You can find more information on the wide range of investments available for your LISA – including shares, funds, exchange traded funds and investments trusts – by visiting our investment options page.
Help to Buy ISA and other transfers
At the moment, we’re unable to accept transfers from Help to Buy ISAs or other ISAs into our Lifetime ISA. We expect to offer this service later on in 2017.
To open a Lifetime ISA (LISA), you need to be aged at least 18 and under 40. Having opened a LISA account, you can keep paying in until the day before your 50th birthday.
If you’re 40 or older, you can’t open a LISA – unless you’re transferring in an existing LISA from another provider. You’ll be able to do this when transfers to AJ Bell Youinvest Lifetime ISAs are available later in 2017.
LISAs can only be opened by individuals. And you must ordinarily be a resident of the UK, a Crown employee working overseas, or a spouse or dependant of a Crown employee.
You can pay in up to £4,000 per year into your Lifetime ISA until the day before your 50th birthday. But be careful not to exceed the overall annual ISA subscription limit of £20,000, which a payment into a LISA normally counts towards.
Yes, you can open a Lifetime ISA alongside any other ISAs you may hold (cash, stocks and shares, help to buy or innovative finance). But be careful not to exceed the overall annual ISA subscription limit of £20,000, which a LISA normally counts towards.
You can also open more than one Lifetime ISA, but you can only pay in to one each tax year.
You can withdraw money from your Lifetime ISA (LISA) to fund the purchase of your first home, as long as it’s worth £450,000 or less, and you’re buying with a mortgage.
You can also withdraw money from your Lifetime ISA when you’re 60 or older. If you withdraw cash from your LISA for any other reason, except in the case of terminal illness, you’ll have to pay a 25% government withdrawal charge. This means that for every £100 you withdraw (the £80 you put in plus the £20 bonus), £25 would be deducted and you’d only get back £75 – less than the £80 you put in.
Special rules apply to withdrawals made in the 2017/18 tax year. It is possible to withdraw all the funds from your Lifetime ISA - this means your Lifetime ISA will be closed. As you will not have received the government bonus you won’t have to pay the government withdrawal charge. However, you are not able to withdraw part of the monies from your Lifetime ISA in the current tax year.
The government bonus is calculated at 25% of your payments in. So if you pay £80 into your Lifetime ISA, your government bonus will be £20. The bonus is paid directly into your Lifetime ISA, and is arranged by us automatically.