Lifetime ISA calculator

Our Lifetime ISA calculator assumptions

Our Nuts About Money Lifetime ISA calculator is designed to help you estimate your Lifetime ISA savings in the future – and hopefully get you on track to build up that nice big deposit needed for your first home (or even use it for retirement, but more on that later).

We’ll cover what Lifetime ISAs are below if you’re not sure – but as part of our calculations, we’ve assumed that you’ll get a 25% bonus from the government on all of your future contributions (your monthly savings figure), but we haven’t applied this bonus to your current LISA savings, as it’s likely your bonus is already included in that figure (the bonus usually arrives into your account after a month from when you add to your LISA).

You also can’t add more than £4,000 per tax year (April 6th to April 5th the following year) to a LISA, so we’ve put a maximum annual limit of £4,000 – which is £333 per month.

And, you can only save into a Lifetime ISA from 18 years old to 50, so there’s a limit of 32 years for how long you can save for (for longer savings, check out our pension calculator).

With a Lifetime ISA, you can either save cash in return for interest, with a Cash Lifetime ISA, or you can invest your money in things like stocks and shares (more on those below), with the aim of growing your money much larger over time, which is done through a Stocks and Shares Lifetime ISA.

Our Lifetime ISA calculator allows you to switch between savings or investing, depending on what suits you – we’ll cover both options in more detail below.

With cash savings, you’ll often see an advertised interest rate specified as AER (Annual Equivalent Rate), which is a measure of how much you’ll make in a year's time from your savings. But, it’s not actually just the interest rate, it includes something called compound interest, which is your interest itself making more interest, and this snowballs over and over. Normally, interest is paid monthly, so over the year, it has a small impact on what you actually make in interest. If you were just receiving the interest, it would be called the gross rate.

That was confusing wasn’t it? Anyway, if you put the interest rate you expect to get from your Lifetime ISA provider in a year (which is likely AER), our calculator will handle the compound interest over the years.

With investing, you won’t earn a set amount of interest, but your money could grow by an average percentage each year – and we’ve accounted for compounding within the investing calculation too (so the money you’ve made, earning more money itself the next year).

And finally, Lifetime ISAs are tax-free. Whoop! So we haven’t included any tax payments within the calculations.

Nuts About Money tip: if you’re not sure where to find a great Lifetime ISA, here’s our top 10 Lifetime ISA providers.

Not sure what something means?

Current LISA savings

This is how much you’ve got in your Lifetime ISA account already.

Monthly contributions

This is how much you are intending to save per month into your Lifetime ISA. 

The most you can save is £4,000 per year (into any Lifetime ISA), so you can save up to £333 per month.

Nuts About Money tip: if you’re planning to save for retirement and want to save more, use our pension calculator. And if you’re planning to save more into a regular ISA, use our ISA calculator to help you plan better.

Duration

This is how long you are planning to save for, and you can save into a Lifetime ISA for up to 32 years, from the age of 18 to 50 – although people often use them to buy a home, so often quite a bit under 32 years.

Note: you can only open a Lifetime ISA if you’re under 40.

If you’re intending to save for longer, such as for retirement, you might want to consider a personal pension, as they’ve got some great tax-free savings benefits too. We’ll cover those below, and remember, you can also use our pension calculator.

Savings interest rate

This is how much interest you’ll get each year in return for keeping your savings with a bank or financial company (more on interest below). You would get this with a Cash Lifetime ISA (more on those below).

Investment growth rate

This is how much you’ll expect your money to grow each year (as an average). This is for a Stocks and Shares Lifetime ISA (more on those below). 

As a guide, 5% per year is seen as a middle of the range forecast, 8% on the higher end and 3% on the low end (these are guidelines set by the Financial Conduct Authority (FCA), who are the people who look after financial companies).

What is interest?

Interest is what you earn from depositing your cash with a financial company (normally a bank, but it doesn’t have to be). In return for you storing your money with them, they give you a bit of money back, called interest.

You get interest because they make money from your money. They can do a wide range of things with it, such as loan it out to other people and businesses in exchange for higher interest rates than they would give you.

Or, they can deposit it with the Bank of England, who pay them interest, which is called the base rate (a higher interest rate than you’ll get from your deposit with a bank), and pocket the difference.

What is a Lifetime ISA?

A Lifetime ISA, or LISA, is a government scheme to help you save your first home, although they can also be used for later in life if you don’t want to use it for your first home (a pension can often be better though, more on those later).

Anyway, with a LISA, you can save up to £4,000 per tax year (April 6th to April 5th the following year), and you'll benefit from a massive 25% bonus from the government on everything you save into it, so up to £1,000 free each year. This bonus is automatically added to your LISA account.

Your money will grow tax-free, so there’s no tax to worry about either, so it can grow much more over time.

You can use the money towards your first home, as long as you’re a first time buyer (so haven’t bought a home before), and the property has to be under £450,000. You also have to live in it (so not a buy to let).

However, there are some rules to open one, you need to be at least 18 years old, and be under 40. You can also only save into one until you’re 50.

And if you don’t end up using your LISA for your home, if you want to withdraw your money from your account, you’ll face a hefty 25% fee, which works out as more than the 25% bonus (it sounds odd, but the maths works out). Or, you can wait until you’re 60 years old, when there’s no penalty fee.

Cash Lifetime ISA

A Cash Lifetime ISA is where you simply save cash in return for interest payments, just like a regular savings account with a bank – except, you still get the 25% bonus from the government, and it grows tax-free.

Stocks and Shares Lifetime ISA

A Stocks and Shares Lifetime ISA is where your money is invested, with the aim of growing it further over time (instead of earning interest), and is a great option for longer term growth of your money.

If done right, they’re not as complicated or risky as they might seem, and can significantly increase your savings over time, potentially much more than interest from a cash savings account – and you can simply let the experts handle the investments (meaning you don't need to know much about investing).

It's worth mentioning that shares represent part ownership of a company (you own a part (share) of a company), and they have a monetary value (e.g. £100), and when a company does well and grows, this value usually increases over time (e.g. to £200), and therefore your investment value increases.

Most investment strategies would include owning thousands of different shares (companies), often by being invested in what’s called a fund, which is a large group of shares or similar kind of investments to shares (like loans to governments called bonds). 

This reduces a lot of the risk of your money falling in value significantly, and helps your money grow over time. Depending on how much it grows will usually depend on the level of risk you’re happy with, and the type of investment you’d like.

With investments, your money will always go up and down in value day-to-day, but over time (e.g. over 5 years or more), and with the right investment strategy, it would typically grow fairly significantly (although there’s never any guarantees).

The easy, and recommended way, is to let the experts manage things for you. Or, if you’re confident, you can manage your own investments. Find all the top providers for both options with our guide to the best Stocks and Shares Lifetime ISAs.

What about retirement?

If you are planning to save for later-in-life, such as retirement, a Lifetime ISA can be a good option, as they grow tax-free, and you get the government bonus (25%). You can also withdraw from them tax-free too.

However, it’s a bit of a no-brainer to use them for your first home if you are able to, as you can take advantage of the free cash and get on the property ladder.

For retirement, you also have the option of a pension, which you’ll likely be familiar with if you have a job, but you can also save into your own pension, called a personal pension, alongside your pension from work.

With these, you’ll also get a 25% government bonus, which is to refund tax you’ve paid on your income (at 20% tax rate).

And if you earn over £50,270, and pay 40% or 45% tax, you’ll also get this tax back too (which you do by claiming on a Self Assessment tax return).

So, tax-wise, if you earn under £50,270, a Lifetime ISA can be better as you won’t pay any tax when you withdraw from it, otherwise a pension is typically better. However, there’s more factors to consider, for instance, pensions aren’t included for Inheritance Tax reasons, but a LISA is. And, you can save a lot more into a pension (up to £60,000, or your total income each year, whichever is lower), plus more benefits too.

We won't go into all the details now, but check out our guide to a Lifetime ISA vs pension to learn more. And here’s where to learn more about personal pensions, or if you’re keen to get started, here’s our guide to the best private pensions.