Hargreaves Lansdown Lifetime ISA
Save for your first home and retirement at the same time
The Lifetime ISA was launched in April 2017 offering savers a 25% bonus from the government.
- Fund Choice: A range of portfolios for your Lifetime ISA suited to your chosen risk level and investment style
- Invest From: From £100 to £4,000.
Why we like it: Simple annual portfolio management fees of 0.45%-0.75% up to £100k. 0.25%-0.35% beyond £100k. There are some underlying fund costs and market spread charges. Easy, online setup. Start with as little as £100 up to £4,000. Plus, live chat, helpful customer support and really useful investor tools & guides. Nutmeg are regulated by the FCA & are covered by the FSCS. Lifetime ISA and tax rules apply. Capital at Risk. Approved by Nutmeg 09/08/2024
- Fund Choice: Over 2,000 Funds, Shares and ETF's
- Invest From: £25 per month
Why we like it: Start from £25 pm & save up to £4,000 pa. Wide choice of stock market linked investments or utilize investment ideas. Can be retained in cash. Simple annual management fee of 0.25%. Deal from £1.50 & never pay more than £5.00 per online deal. AJ Bell are regulated by the FCA & are covered by the FSCS. AJ Bell do not offer advice. Capital at risk
- Fund Choice: Choose between a Cash Lifetime ISA and get a competitive interest rate on top of your tax-free savings and a government bonus, or a Stocks & Shares Lifetime ISA to invest and grow your first home savings over time. Government withdrawal charge may apply
- Invest From: £1
Why we like it: Cash Lifetime ISA: Market-leading interest rate of 4.4% AER (variable) which includes a 3.5% base rate (variable) and a fixed one year bonus interest rate of 0.90%. Stocks and Shares Lifetime ISA: Three starting options: Cautious, Balanced or Adventurous. Earn 3% AER variable on any uninvested cash you hold within Stocks and Shares Lifetime ISA. Use handy Deposit Calculator to work out how much you need to save, and how long it’ll take you to achieve your deposit goal. Useful Jargon-busting First Time Buyer guides. Must be UK resident aged 18-39. If you need to access your money for any other reason than your first home or retirement, you’ll pay the Government penalty
- Fund Choice: Over 3,000 Funds, Investment Trusts, Bonds, ETF's or Cash
- Invest From: £100 single or £25 per month
Why we like it: Easy to setup in a matter of minutes. Start with as little as £25 pm & save up to £4,000 pa. Wide choice of stock market linked investments, or can be retained in cash. Simple annual platform fee of 0.45%. Other charges may apply. Hargreaves Lansdown are regulated by the FCA and are covered by the FSCS. Capital at Risk
Lifetime ISAs
From April 2017 all eligible savers between the ages of 18 and 39 have had the option of opening a Lifetime ISA.
A Lifetime ISA a new type of account which is designed to help young people to save for both their first home and for their retirement simultaneously. You can contribute up to £4,000 into this ISA in each tax year, the government will then provide a 25% bonus on these contributions at the end of the tax year, this means savers can gain an extra £1 for every £4 they save, so those who save the maximum each year will receive a £1,000 bonus on their savings each year.
The money held within the lifetime ISA can be used to either pay for part, or all of a first time home or it can be used to save for retirement. Savers will be able to benefit from earning the bonus on their contributions until the age of 50 years and will be able to have a maximum individual contribution of up to £128,000 which can be matched by the government, to a maximum of £32,000.
This provides a logical incentive to begin saving for your future.
You will be able to transfer your ISA to another provider and it should take no longer than 30 days.
Making Withdrawals from a Lifetime ISA
You can withdraw the money at any time before you turn 60. However, you will lose the government bonus, the interest on this bonus, and pay a 5% charge. Therefore, you should only invest in this type of ISA if you’re confident that you will be able to leave the money untouched. If you’re likely to need the money before then, then a Cash ISA may be of more use as you would not lose your interest.
Using a Lifetime ISA to Purchase a First Home
Savers will be able to contribute to one Lifetime ISA in each tax year, as well as a cash ISA and stocks and shares ISA. This gives you a wider pool of options when planning your savings, particularly if you’re unsure whether you’ll need to withdraw your savings before the age of 60 but would still like to pay in to a Lifetime ISA.
You can use your ISA to fund your first home, details below:
- Funds can be used to buy a first home, up to £450,000, from a year after opening the account and can be withdrawn from age 60 to fund retirement
- If someone is using their Lifetime ISA to buy a first time home with someone else they can both use their lifetime ISA and benefit from the government bonus
- If the saver does not use all of their lifetime ISA savings on the purchase of their first home, then any leftover including the government bonus can be used to fund their retirement
- If you have a Help to Buy ISA you can transfer those savings into a Lifetime ISA or continue saving with both, however you will only be able to use the bonus from one of the schemes to fund the property purchase
Using a LIfetime ISA for Retirement
Full or partial withdrawals can be made from the age of 60. The money can be used for any purpose and will be paid free of tax, funds are permitted to remain invested and any interest and investment growth will be tax-free. Withdrawals are also tax-free.
You will also be able to pass on your lifetime ISA to a spouse or civil partner. Additionally, family are able to pay in to a lifetime opened by a child or grandchild. This can be used as part of inheritance tax planning.
You can open a lifetime ISA with a bank, building society or investment broken since April 2017. However, not all providers are planning to offer this product immediately.