Where can I open a Lifetime ISA?

Ready to start saving for your first home? A Lifetime ISA, with its massive 25% government bonus is pretty much perfect. Good choice.

You can open a Lifetime ISA online easily, it will take around 10 minutes to fill in your personal details, and then that’s it. All yours to save away!

The hard bit is finding the right Lifetime ISA provider (company) for you. And that’s where we come in. We’ve reviewed all the top Lifetime ISAs providers to make things easy for you (we’ve even put together the top 10 Lifetime ISAs), and here are the top ones:

Best Lifetime ISA

Easy to use, and top interest rate.

What do I need to open a Lifetime ISA?

Opening a Lifetime ISA is pretty straightforward, and it’s all online too. All you need is your personal details, such as your address, and then things to prove who you are, such as your National Insurance number, and a passport or driving licence.

Can I open a LISA with my bank?

You may be able to open a LISA with your bank, but it’s unlikely, as most banks don’t offer them. Plus, the interest rates are pretty low with those banks that do.

The best interest rates (the money you’ll get from your savings) are with the modern financial companies such as Tembo – who can also help you with the mortgage when the time comes too.

Should I open a Lifetime ISA?

For your first home

If you’re saving for your first home, and expect to buy a home for under £450,000, it’s likely a good idea to start saving into a Lifetime ISA (LISA), as you’ll get a whopping 25% bonus from the government on your savings – which can be a welcomed boost.

You can save up to £4,000 per tax year (April 6th to April 5th the following year), so you’ll get up to £1,000 free each year, if you’re able to save the maximum.

Plus, your money will grow tax-free, meaning no tax to pay ever! You might pay tax on your savings and investments outside of an ISA (Individual Savings Account).

We’ll cover all the benefits and features just below. 

But, if you’re planning to buy a home worth more than £450,000, or think there’s a high chance you’ll end up buying a home worth more than that, you might be better off saving within a different type of ISA, such as a Cash ISA (for saving cash) or a Stocks and Shares ISA (for investing your money)...

As with a Lifetime ISA, if you don’t use it to buy a home, but want to get your cash back out before you’re 60, you’ll have to pay a hefty 25% penalty, which works out as more than the bonus (it sounds odd, but the maths works out).

You could keep it until you’re 60 if you don’t need the money (or even later, until you retire), when you can withdraw it penalty-free, and tax-free too. However, you’ll likely want the cash to buy your first home.

For retirement

If you’ve already got a home, or are not interested in saving for your first home, you can also use a Lifetime ISA to save for later in life (typically retirement). 

You’ll still get the 25% government bonus, and you can still save up to £4,000 per tax year.

You can keep saving up until you’re 50 years old, and then start withdrawing from it at age 60.

It can seem like a great option, and could be for you – it all depends on your personal circumstances.

However, a personal pension could be a better option, as you’ll also get a 25% bonus from the government (which is tax relief, refunding tax you’ve paid on your income), and you can claim back even more tax if you’re a higher rate (40%) or additional rate (45%) tax payer.

You’ll also need to make the right investment decisions within a LISA to sensibly grow your money over time – it’s typically far better to invest within a Stocks and Shares LISA, rather than a Cash LISA, when considering using a LISA for long term saving, as the potential to grow your money over time is far bigger.

With a pension, it can be easier to find a provider where the experts simply handle things for you (check out the best managed SIPPs to learn more about that).

And pensions have added benefits, such as that they don’t count towards Inheritance Tax, should you sadly pass away. You can learn lots more with our guide to a Lifetime ISA vs pension.

About Lifetime ISAs

Let’s run through Lifetime ISAs so you’re sure they’re right for you, and a bit of a recap if you do know the details.

They’re primarily designed to help you save for your first home, and you’ll be able to save £4,000 per tax year, and get a 25% bonus, up to £1,000 per year.

Note: the £4,000 per year allowance is part of your overall annual ISA allowance, which is £20,000 per tax year.

You’ll need to be a first time buyer in order to use it for a home purchase, which means you’ve haven’t bought any property before. And the home needs to be worth less than £450,000.

You can open a LISA as long as you’re aged between 18 and 39, and keep saving into it until you’re 50. You can then withdraw from it from age 60, unless you’re using it for your first home.

If you withdraw from it before 60, and not as part of buying a property as a first time buyer, you’ll have to pay a 25% penalty, which works out as more than the 25% bonus you get when saving into one.

You also need to have your LISA open for at least 12 months before you can use it (you can just have £1 in it until you’re ready to start saving). And you can only save into one LISA per tax year.

You can pick between a Cash Lifetime ISA or a Stocks and Shares Lifetime ISA…

A Cash LIfetime ISA is where you simply save cash, and earn interest in return.

A Stocks and Shares Lifetime ISA, is where you can invest your money, and is typically seen as a better way of growing your money over time (typically over 5 years or more). You can either let the experts handle things, and use sensible long term investment strategies, or you can make your own investments.

If you’re not sure where to get started with a LISA, check out Tembo¹, it’s easy to use, has one of the top interest rates out there (for cash savings), and the experts can manage your investments for you (if you want to invest your money).

Can I use a LISA with a partner?

Yep! If you and your partner are both first time buyers, and both have a LISA, you can use both towards your new home!

Even if one of you isn’t a first time buyer, the other one can still use their LISA towards your new home.

Transferring LISAs

Once you’ve got a Lifetime ISA, you’re not stuck with the same Lifetime ISA provider forever. You can transfer your LISA to another provider whenever you like.

So, if you see a new provider pop up with a high interest rate, you can simply transfer your LISA across and start getting that increased interest. Kerching!

All you need to do is ask your new provider to transfer your existing LISA, which you can do when you first sign up for your account.

Don’t withdraw your money and add it to your new one. Make sure you transfer it via your new provider.

Can I open a Lifetime ISA in person?

Not normally. Lifetime ISAs are typically online, via a website or mobile app, where you can sign up directly, and then start saving. Most high street banks, with branches across the UK, don’t tend to offer Lifetime ISAs.

Nuts About Money tip: if you need a bit of help opening a LISA, here’s our helpful guide to open a Lifetime ISA.

Are LISAs safe?

Yep. Lifetime ISAs are perfectly safe to save into.

Lifetime ISA providers need to be approved by the Financial Conduct Authority (FCA), who are the people who make sure financial services companies are looking after you and your money.

That means your money will also be protected by the Financial Services Compensation Scheme (FSCS), which protects your money up to £85,000, should anything happen to the Lifetime ISA provider, such as going out of business (meaning you can get up to £85,000 in compensation).

However, if you’re investing your money, your investments can go up and down in value down time, although with a sensible investment strategy, they should grow over time.

Let’s recap

There we have it, where and how to open a LISA. Simple really isn’t it?

You can open a LISA all online, either on the provider’s website or phone app (if they have one). It typically takes around 10 minutes, and then you’re away. You can start adding money straight away, and start benefiting from that juicy 25% bonus.

Lifetime ISAs are really great for saving for your first home, providing you’re intending to buy a home for less than £450,000, and highly recommended.

They’re also great for long term saving, typically retirement, as you can save tax-free, and get the 25% bonus. However, there’s also a pension, which has lots of the similar benefits (e.g. the 25% bonus), but with some added ones too (such as claiming back 40% or 45% tax if you’ve paid it).

Here’s where to learn more about private pensions if they sound interesting.

Anyway, if you’re keen to get cracking with a LISA, we recommend Tembo¹, it’s one of the best interest rates out there, it’s easy to use, and there’s an expert-managed investment option too. Plus, they’ll also be able to help with the mortgage when the time comes.

Happy saving!