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A Lifetime ISA is a great option to save for your first home – it’s tax-free and you get a massive 25% government bonus! The best expert managed Stocks and Shares Lifetime ISA is Moneybox. And the best self-managed Stocks and Shares ISA is AJ Bell.
Keen to save your hard earned money for your first home, within a Stocks and Shares Lifetime ISA? Great choice. You’ll get a massive 25% government bonus on all your contributions, plus potential gain from investment growth over time, all tax-free.
We'll cover everything you need to know about Lifetime ISAs below, but first here’s the best Stocks and Shares Lifetime ISAs.
This is where the experts handle everything for you, all you need to do is add your money.
Check out Tembo, it's easy to use, low cost overall and the customer service is excellent.
Savings rate 4.75% - plus a 25% bonus
Tembo is one of the best Lifetime ISAs out there – it’s got one of the best interest rates out there, and it’s easy to use, with a great app on your phone, packed with tools to help you save more.
They’ll also transfer your existing Lifetime ISA over if you have one too (they’ll handle everything).
There’s two options, a Cash LISA (with the top interest rate), or a Stocks and Shares LISA, where you can simply let the experts handle things, and aim to grow your money more over time).
They'll also be able to help you with the mortgage when the time comes to buy your first home – and help you borrow more if you need to.
The customer service is top notch too.
No management fees (for 6 months)
Nutmeg is a good digital wealth manager – their experts will handle everything for you. However, the investment track record isn’t the best, and they’re one of the most expensive. Plus, they’re the furthest you’ll get from socially responsible investing. There’s better options out there.
Check out Tembo, it's easy to use, low cost overall and the customer service is excellent.
Where you make the investment decisions.
Check out Tembo, it's easy to use, low cost overall and the customer service is excellent.
AJ Bell is well established, with a good reputation.
It's one of the cheapest traditional stock brokers out there (charging a low annual fee).
There's a huge range of investment options – pretty much every investment out there (including both funds and shares).
The customer service is great too.
Overall, it's one of the best options.
Hargreaves Lansdown (HL) is the most popular investment platform in the UK, it’s used by over 1.8 million people, saving over £130 billion. It’s very trustworthy, and safe to use.
They offer a great Stocks and Shares Lifetime ISA – which offers the full range of investment options, but also has reduced costs just for the LISA (compared to other types of investment accounts), making it one of the best LISA options out there.
It’s great for making your own investments, or you can pick ready-made choices where you can leave it to the experts.
Although there’s a lot of savings and investment platforms out there (places to save and invest), there’s not too many Lifetime ISAs (there’s quite a bit of admin for the investment company to do, so most steer clear of them).
However, we’ve done the research and compared all the best Lifetime ISA providers (companies who offer Lifetime ISAs), to help you find the best one for you.
Here’s the criteria we used:
We often recommend using an expert-managed investment platform for your investments, as you can be sure your money is in safe hands and your money is growing using the right investment strategy.
Having said that, the best Stocks and Shares ISAs don’t offer Lifetime ISAs which is a big shame!
However, you do have a couple of options including Tembo¹ and Nutmeg¹. Tembo is a great app that allows you to save for your first home. They can also help you get on the property ladder with a mortgage and unique options to increase the amount you can borrow and boost your deposit.
Nutmeg are pretty good overall, but the investment performance isn’t quite as good as some of the rest, and the fees are a bit higher. However, it’s still a good expert-managed Stocks and Shares Lifetime ISA.
The best self-managed Lifetime ISAs are great too, but not typically the cheapest. Unfortunately, there’s no low cost, commission-free option with Lifetime ISAs…
Having said that, the 25% bonus makes it well worth getting if you want to invest your savings (for your first home), even with the higher fees.
The best Stocks and Shares Lifetime ISA for beginners is often one managed by experts. This way, you don’t have to worry about which investments you want to make (it’s pretty complicated), simply let the experts handle everything – you just add your money, it's as easy as that.
So, with that in mind, the best is Tembo¹. They can handle the investments, you just need to pick from a few simple investment options (it's all explained within their app).
Nutmeg¹ have the option to use a self-managed Lifetime ISA, just pick from a ready-made portfolio…
This is where the stock brokers (companies that buy and sell investments for you) manage the investments (their experts do), and they have a simple range suited to different investors (such as long-term growth).
These can be a great way of benefiting from a wider range of investment options, experts handling the investments, and often lower fees.
However, they can be a bit more complicated to get started if you’re completely new to investing.
If that sounds interesting to you, check out AJ Bell¹, they’re one of the best stock brokers who also offer a Lifetime ISA. You also have Hargreaves Lansdown¹, who are great too, but have slightly higher fees.
Not 100% sure what a Lifetime ISA (LISA) is? No problem. They’re a great option to save for your first home, but there are some Lifetime ISA rules. Let’s run through everything.
A Lifetime ISA is a type of ‘Individual Savings Account’ (ISA), a government scheme, that helps you save for your first home.
You’ll get a massive 25% government bonus on everything you add into your LISA, and you can add up to £4,000 per tax year – so you’ll get up to £1,000 in free cash every tax year to help you save for your first home!
Note: the tax year runs from April 6th to April 5th the following year, and you can only pay into one Lifetime ISA per tax year.
Not only that, but your savings and investments are completely tax-free as they grow too (you don’t pay tax). So, you don’t have to worry about Capital Gains Tax, Income Tax or Dividend Tax (all taxes you might pay if you make lots of income or profit on your savings and investments).
The £4,000 limit is your annual Lifetime ISA allowance and makes up part of your total annual ISA allowance, which is £20,000 per tax year. So, you’ve got £16,000 left to save and invest in other ISAs. That’s if you’re lucky enough to have even more in savings each year!
The other types of ISAs are a Cash ISA (to save cash) and a regular Stocks and Shares ISA (to invest your money, although you don't get the 25% bonus). There’s also an Innovative Finance ISA, which is less common, with these you are lending money to others directly via a platform (a website).
You can open one if you’re aged between 18 and 39, and keep paying into it until you’re 50 – but they’re not a replacement for a pension. Here’s where to learn more about personal pensions and the best pension providers.
The main downside with Lifetime ISAs is that you must use it for your first home, and the value of the property must be less than £450,000. Otherwise, you'll have to wait until you're 60 years old to withdraw money, unless you want to pay a very hefty 25% fee – which works out as more than the free 25% government bonus you get when you add money.
Oh, one more thing. You’ll need to have your LISA open for at least 12 months before you can use it to buy a home.
There’s actually 2 types of Lifetime ISA, a Cash Lifetime ISA, and a Stocks and Shares Lifetime ISA.
A Cash Lifetime ISA is where you can simply save cash in return for interest, just like a regular savings account (where you earn money based on an interest rate per year) – but you also get the 25% government bonus!
This is recommended if you’re looking to buy your home soon (within the next few years). Download Tembo¹ if you’re interested in getting a Cash Lifetime ISA.
With a Stocks and Shares Lifetime ISA, you can invest your cash with the potential to earn more than you would saving cash – while still getting the 25% bonus on your contributions.
This can be a great option for building up your savings much more over the long term. However, it is often not recommended if you’re looking to access your cash in the short term (in the next few years).
Again, if you're interested in getting a Stocks and Shares Lifetime ISA, check out Tembo¹, they specialise in them, plus their app is easy to use and their service is excellent.
We’ll now run through the different types of investments you can get.
When you add money to a Stocks and Shares Lifetime ISA, your money can be invested into:
Stocks and shares are where you own part of a company, you own a ‘share’ of the company. These shares are bought and sold on stock exchanges all across the world, such as in the UK, we have the London Stock Exchange (LSE).
All the shares of a company combined make-up it’s total value, and this value and so the value of the shares, can change over time depending on things like the business performance (for instance how much profit it makes) and the stock market in general.
Shares can also pay out its profits to its shareholders, and these are called dividends.
Investment funds, also called mutual funds, are groups of lots of different investments (e.g. shares) all pooled together into a single investment – making them a great way of investing, they’re typically cheaper and easier than buying all the different investments individually.
For instance, if you wanted to invest in the top 100 companies in the UK (called the FTSE 100), you could buy a share of a FTSE 100 fund. There’s lots of different funds out there, for all different types of investments, other popular funds include all companies in a particular industry, such as healthcare companies, or technologies companies.
Some investment funds can also be bought and sold on stock exchanges, just like individual shares, and so these are called exchange-traded funds (ETFs), and are very popular.
You can also invest in bonds, often as part of an investment fund, and these are effectively loans to governments or large corporations (corporate bonds), in exchange for regular interest payments. These are typically seen as lower risk than stocks and shares.
There’s also commercial property, such as offices and shops, which pay rent, so provide a regular income. Typically these are within investment funds too.
When investing in a Stocks and Shares Lifetime ISA, there are some fees involved, as with all investment accounts.
You’ll typically pay an account management fee to the Lifetime ISA provider, which is normally a percentage of your total investments, and this can range from 0.25% to around 1% per year.
You’ll then also pay fees for the investments themselves, and this depends on which investments you want to make.
With an expert-managed ISA, they’ll invest in investment funds, and the fund itself will charge a fee, which goes to the experts managing the fund, called the fund manager. And this is exactly the same if you’re investing in investment funds within a self-managed ISA.
Investment fund fees can range from 0.06% to 1.5%+, it all depends on which fund it is.
With expert-managed ISA, expect to pay around 0.75% as an account management fee to the Lifetime ISA provider and around 0.35% for the investments. Giving a total of around 1.1% per year.
With self-managed ISAs, the management fee is often a bit lower, for instance AJ Bell¹ is 0.25% for holding investment funds (one of the cheapest).
However, you’ll also have to pay a fee to buy and sell investments, which can range from £1.50 to £11.95 depending on the Lifetime ISA provider (the stock broker).
It can all be a bit confusing right? Before you invest, you’ll be shown the exact fees for each investment you want to make. Or, the total cost if you’re using an expert-managed ISA.
Note: Cash Lifetime ISAs don’t typically have fees as they’re a savings account – however you may find some have a monthly account fee (for instance £1 or £2 per month).
It’s perfectly safe to invest within a Stocks and Shares Lifetime ISA.
Every Lifetime ISA provider needs to be authorised by the Financial Conduct Authority (FCA). They’re the people who make sure the Lifetime ISA provider is looking after your money, and treating you fairly. So, they’ve been reviewed and approved to look after your money and are continually monitored.
You can check if a Lifetime ISA provider is authorised by the FCA by checking the FCA register.
This also means your money is protected by the Financial Services Compensation Scheme (FSCS). This gives you protection up to £85,000 should anything happen to your Lifetime ISA provider, such as going out of business.
Also, your money and investments are typically held with separate, large banks, all in your name, and can only be returned to you.
However, this doesn’t mean you can’t lose money, your investments can go down in value. That’s why we recommend a sensible long-term investment strategy, and often managed by the experts, rather than making your own investments.
That’s it for the best lifetime ISAs. We hope that’s made things a bit clearer and you understand why Lifetime ISAs are great for first time buyers (building up your savings with the 25% bonus and tax-free investing – think of all that free cash!).
They’re a really great option if you are saving for your first home (and under £450,000). If you’re not, there’s some better options to save money, such as personal pension and a Stocks and Shares ISA.
As a recap, the best expert-managed Stocks and Shares Lifetime ISA is Tembo¹ followed by Nutmeg¹.
And for managing your own investments, the best Lifetime ISA providers are AJ Bell¹ and Hargreaves Lansdown¹.
Thanks for reading, and all the best saving for your first home, you'll be cracking open the champagne in no time!
Check out Tembo, it's easy to use, low cost overall and the customer service is excellent.
Edward Savage is a leading expert on money, with a background of 8 years working in financial services in London, has a business, accounting and finance degree, runs an investing community, and teaches people about money. He writes about all aspects of personal finance, including pensions, investing, mortgages and insurance.
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Check out Tembo, it's easy to use, low cost overall and the customer service is excellent.