Compare the best lifetime ISAs
Discover how a lifetime ISA works, how to find the best lifetime ISA and more.
How do lifetime ISAs work?
A lifetime ISA allows you to collect free money from the government to spend either on buying your first home or funding your retirement.
It follows all the rules of traditional ISAs, meaning you’ll pay no tax on interest earned, and the amount you can deposit per tax year is capped.
However, on top of the interest paid, you’ll also earn a 25% bonus from the government on the first £4,000 you deposit per tax year. This bonus is available every year until you turn 50.
The catch is: the money can only be withdrawn after at least 12 months to help pay for your first property (worth up to £450,000) or after you turn 60 years old. If you decide to withdraw it in any other circumstances, you’ll face a 25% penalty (reduced to 20% until 5 April, in response to the COVID-19 pandemic).
Lifetime ISAs are available as cash ISAs or stocks and shares ISAs. You must be aged between 18 and 39 to open one.
How to find the best lifetime ISA?
The most important factor to consider when searching for a lifetime ISA is the interest rate paid. You can find the best interest rates by searching for lifetime ISAs on any price comparison website.
Customer service ratings might be of interest to you, but for most savers, this pales in comparison compared to the interest rates on offer.
Pros and cons of a lifetime ISA
- Earn tax-free interest on your savings
- A huge government bonus available every year until you turn 50
- Available as a cash ISA or a stocks and shares ISA
- You can only withdraw your funds in very specific circumstances or you’ll face a 25% penalty
- Only available to those aged between 18 and 39
The government bonus on offer with lifetime ISAs is very generous, but you should be extremely sure you want to open one before you do. Withdrawals can only be made to buy your first home or fund your retirement, unless you’re willing to face a 25% fine.
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