- Updated by
- Richard Berry
- March 24, 2023
Lifetime ISA providers let UK residents between 18 and 40 invest or save a maximum of £4,000 per year of their ISA allowance to use as a deposit for a house or to use in retirement. LISAs give you a government bonus of 25% on top of your contributions, and you can also make money through interest payments and investment returns.
Best lifetime ISA providers compared and reviewed
You can use our comparison of what we think are the best lifetime stocks and shares ISA accounts to compare fees for investing in funds and shares and see if you have to make your own investment decisions or if a professional fund manager does it for you. We have ranked and reviewed the best Lifetime ISAs in the UK that are regulated by the FCA. All investing carries risk.
Nutmeg: Best Lifetime ISA 2022
- Investments: Pre-made portfolios
- Minimum deposit: £100
- LISA fund charges: 0.45% – 0.75%
- LISA share charges: n/a
Capital at risk
Owned by JP Morgan, Nutmeg won the “Best Lifetime ISA” category in our 2022 award, offering one of the simplest and cheapest LISAs with a range of low, medium and high-risk options.
A Lifetime ISA with Nutmeg costs 0.75% of the value of your portfolio, however, account fees drop to 0.35% for balances over £100k. There is an addition charged by the investment fund managers of around 0.2% and the market spread on buying and selling portfolios is on average 0.07%
Pros:
- ✔️Simple Lifetime ISA investment platform for beginners
- ✔️Regular investing available (repeat orders)
- ✔️Scaled account fees that reduce as your LISA grows
Cons:
- ❌Cannot invest in individual shares
- Collect 2,500 Avios with Nutmeg – New customers who invest in a Nutmeg globally diversified portfolio can collect 2,500 Avios towards your future adventures.
Hargreaves Lansdown: Best range of LISA investment options
- Investments: Shares, ETFs, bonds & funds
- Minimum deposit: £1
- LISA fund charges: 0.45%
- LISA share charges: 0.45%
- Dealing fee: Shares £5.95 – £11.95, funds £0
Capital at risk
Geared more towards more confident investors Hargreaves Lansdown gives you one of the most flexible Lifetime ISAs where you can choose exactly what to invest in. With the HL LISA you can invest in over 3,000 funds, UK and international shares as well as investment trusts, bonds and ETFs.
It costs 0.45% of the value of your Lifetime ISA portfolio to have a LISA with Hargreaves Lansdown. Share charges are capped at £45 per year. There is no charge for buying funds, but shares are charged at £11.95 per deal or £5.95 if you do over 20 deals per month.
Pros
- ✔️Thousands of UK and international shares, bonds & funds
- ✔️Ready-made portfolios with different levels of risk
- ✔️Excellent research and analysis
- ✔️An established and listed company on the LSE.
Can
- ❌You have to pick your own investments
AJ Bell Youinvest: Best for low-cost DIY LISA investing
- Investments: Shares, ETFs, bonds & funds
- Minimum deposit: £500
- LISA fund charges: 0.25%
- LISA share charges:0.25%
- Dealing fee: Shares £4.95 – £9.95, funds £1.50
Capital at risk
Invest as little as £25 per month with regular investing and access to a vast range of investments includingg stocks, over 2,000 funds, ETFs and access your account online 24/7 and deal on the go with the mobile app.
AJ Bell charges 0.25% of the value of your for a general investment account, but share account fees are capped at £3.50 a month. Dealing costs are £1.50 for funds and £9.95 for shares but drop to £4.95 where there were 10 or more online share deals in the previous month
- Recommend a friend, and you’ll both get £100 gift vouchers – When you recommend a friend to AJ Bell Youinvest that invests more than £10,000 in a SIPP or ISA, you and your friend can get One4All gift vouchers worth £100.
- Switch your share dealing account and receive up to £500 to cover exit fees – If you transfer your share dealing general investment account valued at more than £20,000 to AJ Bell they will help cover any exit fees charged by your current provider. They will cover £35 per investment moved and up to £100 for general exit fees, up to an overall maximum of £500 per person.
- Free subscription to Shares Magazine worth £220
Get a free subscription to Shares (worth over £220 per year) by maintaining a balance of £4,000 or more across your AJ Bell investing accounts.
Pros:
- ✔️Pick your own LISA shares, funds and bonds or use their investing ideas
- ✔️Low LISA account fees capped at £3.50 a month for shares
Cons:
- ❌High phone dealing charges
Methodology
We have chosen what we think are the best Lifetime ISAs based on:
- over 17,000 votes in our annual awards
- our own experiences testing the LISA accounts with real money
- an in-depth comparison of the features that make them stand out compared to alternative LISAs.
- interviews with the Lifetime ISA platform CEOs and senior management
Lifetime ISAs Explained
There are only two things you can use the money in your Lifetime ISA for:
- Buying your first home: If you’re a first-time buyer you can use all or some of the money in your account towards the deposit you need to buy a home in the UK worth £450,000 or less.
- Retirement: To help fund your retirement, once you turn 60 you can take all or some of the money out of your account tax free and use it for whatever you like.
If you take money out of a LISA for another reason, you’ll have to pay a penalty and will lose that part of your ISA allowance for the year. This does not apply if you transfer a Lifetime ISA to another provider.
How does a Lifetime ISA work?
As with other types of ISA, it lets you earn interest or investment growth tax free.
You can pay up to £4,000 into a Lifetime ISA each tax year as part of your overall ISA limit (£20,000 in the 2021-22 tax year) and can invest in either cash or stocks and shares. The government then gives you a tax-free 25% bonus on the total amount you pay in.
So if you pay in the full £4,000 you’ll get £1,000 from the government, taking your total savings for the year up to £5,000. You’ll then earn interest or get investment growth on the whole amount.
The bonus is automatically added to your account each month based on the amount you’ve paid in by the provider you have your Lifetime ISA with. If you take any money out before you get the bonus, it will still be paid to you as if the money was still in there.
Most Lifetime ISAs let you transfer your existing ISAs, including a Help to Buy ISA if you have one, into them but the money will count towards your annual £4,000 LISA limit. It won’t affect your £20,000 overall ISA limit for that tax year though.
You’re allowed to pay in up to £4,000 a year until the day before you turn 50, so you could pay in up to £128,000 if you take one out when you turn 18 and pay in the maximum each year. You’d end up with a total bonus of £32,000.
Withdrawing money from a Lifetime ISA
There are three situations in which you can withdraw money from it for free –
- Property: you’re buying your first home (as long as you’ve had the account for at least 12 months)
- Age: you’re over 60
- Health: you’re terminally ill with less than a year to live.
So if you’re not a first-time buyer and don’t use the money to buy your first home you’ll have to wait until you’re over 60 to withdraw it without charge.
If you take money out for any other reason – known as an unauthorised withdrawal – you have to pay a charge of 25% of it, which is more than the government bonus you received.
For example, if you paid in £4,000 and received a bonus of £1,000 you would then have £5,000 before any interest or investment growth. But if you then withdrew £5,000 you would pay a charge of £1,250 and would get back just £3,750 of the £4,000 you paid in, so you should avoid making unauthorised withdrawals if you can.
If you need a specific amount you should take the charge into account to make sure you withdraw enough.
A stocks and shares Lifetime ISA lets you invest in stocks and shares to grow your money rather than getting interest from your provider. You may be able to earn more than with a cash LISA but there’s also a risk that you could lose money so you should only take one out if you are willing to take that risk.
Some providers let you decide what to invest in yourself, such as AJ Bell and Hargreaves Lansdown. Alternatively, if you’re less confident about making your own investment decisions, you can choose a LISA where the investing is done for you. Some have ready-made portfolios for you to pick from, such as Nutmeg and Moneybox, while others invest your money in one specific fund, such as Foresters Friendly Society.
Ultimately, how well your LISA [fca] does depends on what your money is invested in but there are also management fees to pay so you should look carefully at these before choosing a provider as they can eat into your investment returns.
Lifetime ISA investment options
As with a regular stocks and shares ISA, you can invest in a range of options, including individual shares, funds, investment trusts and government bonds, although the degree of choice you have depends on which provider you go with.
Managed investment Lifetime ISAs
If you don’t feel confident making investment decisions yourself, you can choose a provider that manages your investments for you.
Nutmeg lets you choose from ready-made portfolios based on your attitude to risk. For example, you can choose from cautious, balanced and adventurous. The more risk you are prepared to take the higher the potential returns but also the higher the potential losses.
If you are confident in making your own investment decisions Hagreaves Lansdown are AJ Bell Youinvest are two of the biggest investment platforms in the UK where you can buy shares, bonds ETFs, and funds for a Lifetime ISA.
DIY (do-it-yourself) LISAs
DIY Lifetime ISAs – where you choose where to invest your money yourself – are best suited to more experienced investors. The providers to choose from are AJ Bell and Hargreaves Lansdown. Both accept transfers in from other ISAs (up to the annual limit of £4,000). Make sure you look at the fees you’ll have to pay when deciding which is best for you.
As you can only invest £4,000 a year into a stocks and shares Lifetime ISA, if you want to use the rest of your annual ISA allowance of £16,000 you’ll need to pay it into a regular stocks and shares ISA, which you could do with the same provider, or a cash ISA. You can only open one of each type of ISA and pay into one of each type every tax year.
If you want to invest more than £20,000 in a year outside of a pension you can put your money into a general investment account, although you’ll pay tax on any money you make.
Lifetime ISA charges
The main charges you’ll pay are an annual platform charge for holding investments in your account and charges for each deal you make. The provider that is cheapest for you will depend on a range of factors including how often you plan to buy or sell investments.
For example, AJ Bell has a platform charge of 0.25% of the value of your investments. Charges for online deals range from £1.50 for funds to £9.95 for shares (£4.95 if you made more than 10 in the previous month).
Hargreaves Lansdown, on the other hand, has a platform charge of 0.45% but no dealing charges for funds. Its share dealing charges range from £5.95 per deal if you make 20 or more in a month rising to £11.95 for up to nine.
The investments themselves may also have their own charges.
A cash LISA is like an ordinary savings account where you earn interest at a specific rate. The rate can go up or down as there are currently no fixed-rate cash Lifetime ISAs. With Investment Lifetime ISAs you can invest in cash, funds, and stocks. It is possible to get better returns by investing in stocks and funds as opposed to cash, but as with all investing there is risk involved and it is possible to lose money if the investments you pick do not perform well.
Pros of stocks and shares LISAs:
- There is the potential to earn more with a stocks and shares LISA than with a cash LISA.
- They can be a better option if you’re investing your money long term (five years or more) as you’ll have time to make up for any losses.
Cons of stocks and shares LISAs:
- You risk ending up with less money than you put in.
- Charges can eat into your returns.
Pros of cash LISAs:
- You get a guaranteed return through interest.
- There’s no risk of losing your capital.
Cons of cash LISAs:
- You might earn less than with a stocks and shares LISA.
- The interest rate can go down, making your LISA less competitive.
- You may need to check you’re in the highest paying account each year and transfer to a new provider if not.
Whether you should choose a stocks and shares Lifetime ISA or a cash one depends on your attitude to risk and how long you’re planning to invest your money for. If you want to save for your first home over a relatively short period, a cash LISA might be best for you. If you’re saving for your retirement it’s worth considering a stock and shares LISA.
Buying a house with a Lifetime ISA
To qualify as a first-time buyer for the purposes of a Lifetime ISA you must have never owned a home anywhere in the world. You must also have had a LISA for 12 months or more before you can use the money in it to buy a home or you will have to pay the 25% withdrawal charge.
The property you buy must be one you plan to live in (not a buy-to-let) and that you’ll be buying with a mortgage. You can also use your Lifetime ISA to buy a home through a government scheme such as shared ownership or the mortgage guarantee scheme, or to buy land to build your own home.
You need to use a solicitor or conveyancer when you buy your home as the provider of your Lifetime ISA will send the money directly to them to use as all or part of the deposit you need to exchange contracts with the seller – usually 10%. They can also put it towards any extra you need for your mortgage deposit if there’s money left.
For example, if you’re buying a £200,000 home with a 75% mortgage, you’ll borrow £150,000 from your mortgage lender and will need to pay £50,000 towards the purchase price yourself.
If you have £30,000 in your Lifetime ISA, £20,000 can be used for the exchange deposit and the rest can be put towards the remaining £30,000 you need to pay the rest on completion.
Once your solicitor or conveyancer receives the money your property purchase must complete within 90 days although they can ask HMRC for an extension.
If you’re buying with someone else, such as your partner, and they also have a Lifetime ISA you can both use the money in your accounts to buy a home together but they must also be a first-time buyer and the property still has to be worth £450,000 or less.
The money will have to be returned to your Lifetime ISA if your purchase falls through.
Lifetime ISAs for retirement
To use your Lifetime ISA for your retirement you simply withdraw some or all of the money, which you can do from your 60th birthday, and use it however you like.
If you’re an employee, saving into your workplace pension rather than a stocks and shares LISA for retirement is likely to be a better option as your employer must pay money into it as well. Plus, you get 40% tax relief on your pension contributions (41% in Scotland) if you’re a higher-rate tax payer, which easily beats the bonus you get from a LISA.
The money in a LISA is also taken into account for mean-tested benefits and is treated as an asset in bankruptcy while a pension usually isn’t.
The advantages of a LISA for retirement are that you can withdraw the full amount tax free when you hit 60 but only 25% of your pension and you can take your money out early if you are prepared to pay the withdrawal charge. You can’t currently take money out of a pension until you’re at least 55.
Saving for your retirement should be done over the long term so, if you do choose to save into a LISA, a stocks and shares LISA is likely to be a better option than a cash one.
Lifeimte ISA FAQs:
Yes. With cash Lifetime ISAs, under the Financial Services Compensation Scheme (FSCS) your money is protected up to £85,000 per banking institution should your provider go bust.
You are also protected up to £85,000 if you lose money because the provider of your stocks and shares LISA goes bust but this doesn’t protect you if you’re out of pocket because the companies you are invested in fail.
Anyone over 18 and under 40 who is a UK resident can open and pay into a Lifetime ISA (LISA). If you stop living in the UK you have to stop paying into it.
If you’re not a UK resident you can still open and pay into one if you’re a crown employee working overseas, such as you’re in the UK armed forces, or you’re the spouse or civil partner of one.
Only individuals can open Lifetime ISAs – there are no joint accounts. This means if you’re part of a couple you can each have one as long as you’re eligible.
You can only open one Lifetime ISA each tax year and pay into one, although you can have more than one over your lifetime.
What if I change my mind about a Lifetime ISA?
There’s a cooling-off period of 30 days when you first take out the account during which you can close it without charge and won’t get the bonus.
There’s no charge for your Lifetime ISA if you die.
You apply for a Lifetime ISA directly with your chosen provider, which is usually done online. You will have to supply details such as your date of birth, national insurance number and proof of address so the provider can make sure you’re eligible as well as proof of identity.
Help to Buy ISAs were available between 2015 and 2019 to help first-time buyers save for a deposit to buy a home worth up to £250,000, or £450,000 in London. Although you can no longer open a Help to Buy ISA, as they’ve been replaced by LISAs, if you already have one you can continue to save into it until November 2029.
As well as interest, you get a bonus of 25% of the amount you save into it from the government up to a contribution limit of £12,000, giving you a total bonus of up to £3,000. You solicitor or conveyancer claims the bonus for you once you’ve exchanged contracts on a property.
After an initial deposit of up to £1,000, every month you can pay a maximum of £200 into it (up to £2,400 a year) and add another £50 to your bonus. This means it would take a minimum of four-and-a-half years to get the full amount. You have to save at least £1,600 to qualify for a bonus.
You can save more in a LISA each year – as a lump sum if you choose – than in a Help to Buy Isa and get a bigger bonus. And as you are paid your LISA bonus every month, you can get interest or investment growth on it. You can buy a more expensive property outside London with a LISA too.
Unless you plan to buy a property within the next 12 months it’s worth transferring your Help to Buy ISA into a Lifetime ISA, although it will count towards your LISA limit for that year.
You can open a Lifetime ISA if you already have a Help to Buy ISA and pay into them both in the same tax year but you can only use the bonus from one of them to buy a home. So, if you use your Help to Buy bonus for a home you’ll then only be able to use the money in your LISA once you turn 60 (unless you pay a penalty to withdraw it early).
Alternatively, if you decide to use your LISA to buy a home you can either transfer your Help to Buy ISA into it first, transfer it to another ISA or take the money out. As you won’t be using it to buy a home you won’t get the bonus.
To transfer your Help to Buy ISA you need to fill out a transfer form with your new provider, which will organise the transfer for you. If you take the money out yourself it will lose its tax-free status and you’ll only be able to reinvest it into an ISA as part of your allowance for the current tax year.
Yes, it’s possible that the rules on Lifetime ISAs could change in the future to allow you to take money out without charge in other circumstances. There may also be changes to the tax rules around pensions. This means that whether a LISA suits you and when saving into a pension beats saving into a LISA may also change.
Because profits are tax free and the Government will top your LIfe up with essentially a free bonus based on 25% of your contributions. A Lifetime ISA helps you save for buying your first home or later life with a bonus from the government.
For investment Lifetime ISAs, AJ Bell has the lowest platform fee at 0.25% but the cheapest one for you will also depend on how often you plan to buy and sell investments as you also pay charges for each deal.
Yes, you must be at least 18 to open one and under 40. You must be a UK resident unless you’re a crown employee working overseas or the spouse or civil partner of one. To use a Lifetime ISA to buy a home you must be a first-time buyer, which means you have never owned a property anywhere in the world before.
If you don’t use the money in your Lifetime ISA to buy a home you have to wait until you’re 60 to withdraw money without charge (unless you’re terminally ill) but you can take it out if you pay a penalty.
You have to pay a penalty of 25% of the money you take out early.
You may be able to choose to reinvest any income you make from your investments rather than taking the money out with the aim of boosting your returns further.
Yes, you can open and contribute to one of each type of ISA every tax year.
No, but you and your partner can each open a Lifetime ISA and get the bonus.
Yes, you can use some of the money to buy a home and use the rest for your retirement once you turn 60.
This article contains affiliate links which may earn us some form of income if you go on to open an account. However, if you would rather visit the lifetime ISA provides via a non-affiliate link, you can view the product pages directly here:
