Compare The Best Investment Lifetime ISAs (LISA)
We have narrowed down and reviewed a selection of what we think are the best investment or stocks and shares Lifetime ISA accounts. Use our LISA comparison tables, reviews, and guides to decide which LISA is best for you.
Best Investment Lifetime ISA
✔️ Simple to use
✔️ Low cost
✔️ FSCS protected
Nutmeg wins best investment Lifetime ISA as they offer an easy to open, low cost, FCA regulated LISA with different risk/reward pre-built portfolios.
What is an Investment Lifetime ISA (LISA)?
Lifetime ISAs (LISA) let you invest money for your future to contribute towards a deposit for a house or to use in retirement. LISAs give you a government bonus of 25% of your contributions as well as returns through interest. Compare the best lifetime ISA accounts that let you save a maximum of £4,000 per year of your ISA allowance.
Nutmeg Lifetime ISA
Nutmeg Lifetime ISA Review
Given that Nutmeg is a robo-advisor, its technology must pass muster. Nutmeg’s website is easy to navigate and offers a straightforward route to assessing the company’s performance and its fees. True to its promise, Nutmeg makes its fees totally transparent and investors can explore how much they might pay on different investment amounts across the full range of products. It is not the cheapest provider out there but in terms of value, Nutmeg looks good.
Performance can be measured on different risk levels and it is easy to see how the company has fared against its peers.
The company also promises to avoid jargon and it certainly makes understanding the products accessible to all.
The website also offers pension and ISA calculators and financial planning tools.
Hargreaves Lansdown Lifetime ISA
Hargreaves Lansdown Lifetime ISA Review
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.
AJ Bell Youinvest Lifetime ISA
AJ Bell Youinvest Lifetime ISA Review
A Lifetime ISA (LISA) is an investment account designed to help younger investors save for retirement or their first home. For every £4 you put in, the government will add £1 – up to a maximum bonus of £1,000 per year. Lifetime ISAs can be opened by savers aged 18 to 39 and investors can contribute until they turn 50.
The advantages of AJ Bell Youinvest’s Lifetime ISA include:
- A wide investment range – you have access to a vast range of investments including stocks, over 2,000 funds, and ETFs.
- Low costs – you can deal from £1.50 per trade and will never pay more than £9.95 per online deal.
- Accessibility – you can access your account online 24/7 and deal on the go with the mobile app.
- Regular saving – you can invest as little as £25 per month into your LISA.
Lifetime ISA charges and fees
|Buying and selling investments (per deal)|
|Funds (including unit trusts and OEICs) online||£1.50|
|Shares (including investment trusts, ETFs, gilts, and bonds)||£9.95|
|Shares, where there were 10 or more share deals in the previous month||£4.95|
|Funds custody charge (including unit trusts, OEICs, and structured products)|
|On the first £250,000 of funds||0.25%|
|For funds between £250,000 and £1m||0.10%|
|For funds between £1m and £2m||0.05%|
|For funds over £2m||No charge|
|Shares custody charge (including investment trusts, ETFs, gilts, and bonds)||0.25%||(max £3.50 per month)|
The main attraction of this Lifetime ISA, relative to competitors’ products, is the scope of investments on offer. On the downside, fees are higher than those of some other providers such as EQi, which offers an annual charge of 0.20% on its LISA.
Compare Lifetime ISA Accounts Side-By-Side
Use our side-by-side Lifetime ISA account comparison to compare the best investment Lifetime ISA accounts by pricing, market access, account types and services.
Lifetime ISAs Explained
Lifetime ISAs (individual savings accounts) were launched in April 2017 to help you save money for your first home or your retirement. You can take money out for another reason but you’ll have to pay a penalty and will lose that part of your ISA allowance for the year. You can also transfer a Lifetime ISA to another provider.
Who can open a Lifetime ISA?
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.
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.
There are three situations in which you can withdraw money from it for free – you’re buying your first home (as long as you’ve had the account for at least 12 months), you’re over 60 or 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.
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 also no charge if you die.
What can a Lifetime ISA be used for?
There are 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.
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.
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 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.
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.
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.
Other providers of stocks and shares LISAs include Metfriendly (for serving or retired police officers), Nude, OneFamily, Transact (through financial advisers) and Unity Mutual.
Most let you operate your account online while others also have a smartphone app, including AJ Bell, Hargreaves Lansdown and Nutmeg. Moneybox and Nude are purely app based.
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.
Unity Mutual is the exception though – while it’s technically a stocks and shares LISA it operates more like a cash LISA as you get a guaranteed interest rate, currently at 1.5% (on 24 September 2021), which beats all available cash LISAs.
DIY (do-it-yourself) Lifetime ISAs
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.
Pros and cons of investment Lifetime ISAs vs cash Lifetime ISAs
- 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.
- 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.
Easy investing options for Lifetime ISAs
If you don’t feel confident making investment decisions yourself, you can choose a provider that manages your investments for you.
Moneybox, Nutmeg and OneFamily let you choose from ready-made portfolios based on your attitude to risk. For example, with Moneybox 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.
OneFamily focuses specifically on climate-friendly investments.
With Foresters Friendly Society, Metfriendly, Nude and Unity Mutual you can’t choose how your money is invested.
Which is the cheapest Lifetime ISA?
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.
You don’t pay any fees with Unity Mutual but your returns are limited as your money grows at a specific interest rate.
Top cash Lifetime ISAs
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.
After Unity Mutual, Moneybox currently offers the best cash Lifetime ISA (on 24 September 2021), which pays interest of 0.85%. Other options are from Paragon Bank (0.5%), Nude (0.5%), Newcastle Building Society (0.35%) and Skipton Building Society (0.1%).
How to choose a cash LISA
As well as the interest rate you’re getting, you should consider whether you’ll need to give notice to withdraw your money when choosing a cash Lifetime ISA – Nude requires 95 days.
Also look at how you’ll be able to operate your account. Moneybox and Nude are through a smartphone app only, while Skipton’s account is online only. The Paragon and Newcastle accounts can be operated by post and over the phone as well as online.
How to use a Lifetime ISA to buy a house
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.
Can you have a Lifetime ISA and a Help to Buy ISA together?
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.
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.
How do you open a Lifetime ISA?
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.
How Lifetime ISAs could change
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.
Lifetime ISA FAQs:
Why should I get a Lifetime ISA?
A Lifetime ISA helps you save for buying your first home or later life with a bonus from the government.
Are there age limits and eligibility restrictions on Lifetime ISAs?
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.
Can you withdraw money early from a Lifetime ISA?
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.
What are the penalties for early withdrawal?
You have to pay a penalty of 25% of the money you take out early.
What is automatic reinvestment?
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.
Can you open a Lifetime ISA and another type of ISA in the same year?
Yes, you can open and contribute to one of each type of ISA every tax year.
Can you have a joint Lifetime ISA?
No, but you and your partner can each open a Lifetime ISA and get the bonus.
Can you use a Lifetime ISA to buy a property and save for retirement?
Yes, you can use some of the money to buy a home and use the rest for your retirement once you turn 60.
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