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Best Lifetime ISAs Compared 2020

Looking for ways to fund your first house or enhance your pension? Then read our article on Lifetime ISAs to see if they could work for you. We also have some top Lifetime ISA selections to help you get started.
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Author: Edith Muthoni

Last Updated: September 4, 2020

The government is rooting for you to buy your first home or provide for a more comfortable retirement. That’s what the Lifetime Individual Savings Account (LISA) is all about. The LISA is a tax-free savings account dedicated to helping you save for the future and home purchases.

Introduced in 2017, the Lifetime ISA seeks to replace or complement the Help To Buy ISA (H2BISA) in helping you plan for your retirement. The most unique aspect of Lifetime ISAs, compared to all the other different types of ISAs is the fact that the government tops your investment by 25% annually, to a maximum of £1,000. Remember that investments can go up and down in value and you may not get back all of your initial investment.

Table of Contents

    Hargreaves Lansdown: Best Lifetime ISA Proivider

    Our Rating

    • No set-up or transfer-in charges
    • Wide investment choice
    • Ready-made portfolios available
    • Manage via website, HL app or phone
    Investments may fall as well as rise so you could get back less than you invest.
    The Help to Buy ISA (H2BISA) will be phased out in November 2019 and will be replaced by lifetime ISA that can be seen as the improved version of H2BISA. If you still operate a Help To Buy ISA, you can rest easy knowing that you can transfer all the funds herein to a lifetime ISA free of charge. A reversal transfer from lifetime to HTB is however treated as a withdrawal, effectively attracting 25% withdrawal fees.

    How does a Lifetime ISA Work?

    To qualify to open a lifetime ISA account, you must be between and 18 and 39 years of age. You cannot open a lifetime isas account on or past your 40th birthday, but you will only be disqualified from depositing into this account after hitting 50 years. The 25% government top up balance will only apply to the first £4000 contribution into the account every financial year, though you are free to max the £20,000 tax-free ISA deposit into any other ISA account. There is no lower limit to the amounts you can contribute to the lifetime ISA but only contributions of up to  £4k will earn you a bonus as well as the tax-free deposit and interest rule.Smal cartoon man in front of a red question mark

    The lifetime ISA was primarily designed to encourage a saving culture among the young, and therefore carries what one may consider punitive withdrawal charges. For instance, should you wish to withdraw the savings in a UK ISA, you will be charged a 25% transaction fee. The only exception to this is if you are looking to buy your first house worth less than £450,000 or have been diagnosed with a terminal disease and have less than 12 months to live. Upon hitting 60 years, however, you are free to withdraw and spend your initial deposits and any interests accrued therein plus the government bonus as you deem fit.

    But how punitive is the 25% percent transaction charge and how effective is it in deterring withdrawals? Take, for instance, a case where your savings into the lifetime ISA have over the years reached £8000. The government’s bonus effectively makes it £10,000. If you wished to withdraw this amount for any purpose other than that of buying a house, transferring to another retirement ISA or having reached 60 years, you will be charged 25% of the amount implying that you can only withdraw

    Best Lifetime ISA Currently available 2020: Reviewer’s choice

    REVIEWERS CHOICE

    Hargreaves Lansdown – Lifetime ISA

    Rating

    Account Type

    Lifetime ISA

    Fees

    Annual account charge of up to 0.45%, max £11.95 per online share trade

    Minimum Investment

    £100

    Rating

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    Investments may fall as well as rise so you could get back less than you invest.

    Product Details

    • The most diversified cash lifetime ISA with access to 2500+ investment funds

    Key Facts

    • Must be between 18 and 39 years old to open the account
    • 25% government bonus worth up to £1,000 a year
    • Money can grow free from UK tax, as with other ISAs.

    Pros

    • No set-up or transfer-in charges.
    • Wide investment choice
    • Ready-made portfolios available
    • Manage via website, HL app or phone

    Cons

    • Less bonds than some providers

    Nutmeg Lifetime

    Rating

    Account Type

    Lifetime ISA

    Fees

    0.25%-0.75% per year, 0.17%-0.32% average fund costs

    Minimum Investment

    £1

    Rating

    Visit Now

    Product Details

    • Best for large-scale investors seeking lower administration fees

    Key Facts

    • No minimum deposit required
    • Actively manages your investments at a fee of 0.35%
    • Enjoy significant management fee bargains if you invest more than £100

    Pros

    • Beginner friendly
    • Ideal passive income generating stream
    • You have a choice of investing in high- or low-risk portfolios
    • Low management fees

    Cons

    • Robo investors work on pre-programmed tools and may not always have a clear grasp of your investment goals

    AJ Bell Lifetime

    Rating

    Account Type

    Lifetime ISA

    Fees

    0.25% per year, £1.50-£9.95 per trade

    Minimum Investment

    £500

    Rating

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    Product Details

    • Appeals most to investors looking for the widest range of investment portfolios

    Key Facts

    • Access to expertly managed investments
    • A wide range of investment vehicles to choose from – shares, funds, deals, and ready-made portfolios
    • Transfers in and out accepted

    Pros

    • Free inter-LISA transfers
    • Availability of managed investment portfolio services
    • Attractive interest rates and low management fees
    • Wide range of investment options

    Cons

    • One might consider their minimum deposit of £500 relatively high
    • Ready-made investment portfolios may not always align with your investment goals

    Foresters Friendly Society

    Rating

    Account Type

    Lifetime ISA

    Fees

    2% per year, 0.10% per trade

    Minimum Investment

    £500

    Rating

    Visit Now

    Product Details

    • Best for a growth account or goal-oriented investments

    Key Facts

    • Expertly managed by professional securities traders
    • The account is open to both Forest account members and their immediate relatives
    • Backed by a solid reputation

    Pros

    • More adapted for long term investments
    • Expertly managed funds exposed to less risk
    • Built on a solid foundation of trust and reliability when it comes to finance management

    Cons

    • High minimal deposit amounts
    • Limited investment options

    OneFamily Lifetime

    Rating

    Account Type

    Lifetime ISA

    Fees

    1% per year, up to 0.3% per trade

    Minimum Investment

    £250

    Rating

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    Product Details

    • Most appealing to investors seeking to specialize in share and stock investments

    Key Facts

    • Access both the low- and high-risk lifetime investments
    • Will only invest in shares and stocks
    • A minimum initial deposit fee of £250 and fixed annual return of 1%

    Pros

    • Low management fees with the promise of high returns
    • Highly versatile as the account can be opened and managed online
    • Flexibility in switching accounts internally
    • Presents an investor with the choice between high- and low-risk investments

    Cons

    • Higher than the average minimum deposit

    What are the pros and cons of investing in a lifetime ISA?

    Pros

    • Incentivizes more individuals towards saving for retirement or home buying
    • Gives you access to tax-free incomes upon maturity at 60 years
    • The amounts deposited here can be re-invested in the lucrative equity and property markets
    • Bonuses are still valid for couples
    • The 25% bonus beats most other interest rates offered by investment and savings accounts
    • There is no lower limit as to how much you can save

    Cons

    • Punitive holding charges for withdrawals made before maturity
    • Quite rigid as funds in one LISA cannot only be transferred to another LISA account provider

    Best Lifetime ISA Currently available 2020:

    The government is rooting for you to have a comfortable retirement and to help you set the ball rolling they have introduced Lifetime Individual Savings Account (LISA). The LISA is a tax-free savings account dedicated to helping you save for the future and home purchases.

    Introduced in 2017, the Lifetime ISA seeks to replace or complement the Help To Buy ISA (H2BISA) in helping you plan for your retirement. The most unique aspect of Lifetime ISAs, compared to all the other different types of ISAs is the fact that the government tops your investment by 25% annually, to a maximum of £1,000.

    1. Hargreaves Lansdown Lifetime ISA

    The Hargreaves Lansdown Lifetime ISA allows you to hold both equities and cash. Your account comes backed up with the full array of Hargreaves Lansdown research tools and their analysts' coverage, in addition to top-notch customer service. There is a limit of £4,000 tax-free you can invest in the ISA. Here you have the option of investing your lifetime ISA into stocks and shares markets or using it to save cash.

    Hargreaves' LISA has a maximum annual charge of 0.45% which is capped at £45. So, if you hold £1,000 in shares and £3,000 worth of funds, you would pay £18 a year or £1.50 a month. Dealing and other charges will depend on the mix of shares, funds and ETFs you choose to hold in your investment portfolio. For shares, dealing charges are £11.95 per trade if you made less than 9 trades in the previous month, £8.95 if you made 10-19 trades, and £5.95 if you made 20 or more trades.

    Opening a cash Lifetime ISA requires a minimum lump sum deposit of £100 or monthly deposits of no less than £25. You can open a lifetime ISA online in minutes and it is a flexible, affordable way to save and invest for your first home or later life.
    Key facts:

    • Must be between 18 and 39 years old to open the account.
    • 25% government bonus worth up to £1,000 a year.
    • Money can grow free from UK tax, as with other ISAs.

    Our Rating

    • No set-up or transfer-in charges
    • Wide investment choice
    • Ready-made portfolios available
    • Manage via website, HL app or phone
    Investments may fall as well as rise so you could get back less than you invest.

    2. Nutmeg Lifetime ISA

    Nutmeg is a robo advisor that supports Lifetime ISA investments. Unlike Hargreaves lowdown and most other LISA investment platforms that give you chance to decide on the stocks, funds, and equities you want to invest in, Nutmeg asks you a series of questions designed to help determine your risk tolerance levels. It then uses this information to design an investment portfolio.

    According to the advisor, their ‘portfolio one’ carries the lowest risk as it is primarily comprised of less volatile treasury and corporate bonds. Management fee and deposit amounts The advisor offers two types of investments in the name of fully managed and fixed allocation portfolios. There is no minimum deposit required to invest in either of these investment options with the management fees for deposits below £100K standing at 0.75% and 0.45% respectively. Amounts exceeding £100k report favorable fees that stand at 0.35% for the fully managed fund and 0.25% for fixed allocations.

    • Ideal passive income generating stream
    • You have a choice of investing in high- or low-risk portfolios
    • Low management fees
    • Robo investors work on pre-programmed tools and may not always have a clear grasp of your investment goals

    3. AJ Bell lifetime ISA

    AJ Bell presents you with other 2000 funds that you can choose from when deciding on the best investments for the amounts deposited in your Lifetime ISA account here. Are you a beginner to both Lifetime ISA and the money markets and aren’t sure about how to go about creating an investment portfolio? AJ Bell’s Youinvest platform has a wide range of passive funds that require little to no oversight as well as a pool of ready-made portfolios that you can choose from.

    Charges and minimum deposits Opening a LISA account with AJ Bell requires a lump sum £500 investment or monthly installments of minimum £25 and up to £4,000 per year. Management fees for share investments start from 0.25% and not more than £7.50 per quarter. Funds attract a 0.25% charge while deals and regular investing are charged £1.50 per deal. Unlike most other LISA operative, AJ Bell doesn’t impose charges on LISA transfers.

    • Attractive interest rates and low management fees
    • Availability of managed investment portfolio services
    • Free inter-LISA transfers
    • Ready-made investment portfolios may not always align with your investment goals
    • One might consider their minimum deposit of £500 relatively high

    4. Foresters Friendly Society Lifetime ISA

    Forester offers what we might consider one of the most centralized LISA investment management programs. They only have one fund that they argue to be expertly managed by a team of experts to guarantee steady incomes over the medium and long term. They may, therefore, be your best choice if you looking for a growth account and saving for retirement or house buying in the long term. It also features on our list because it one of the oldest and most reputable financial advisory and management firms to offer Lifetime IAS service. Minimum deposit and fees You can invest a minimum lump sum of £500 or in monthly installments of £100. Existing forester members, their children, and grandchildren are however allowed to contribute £50 as minimum monthly installment. The managed funds attract 1.6% in annual fees.

    • More adapted for long term investments
    • Expertly managed funds exposed to less risk
    • Built on a solid foundation of trust and reliability when it comes to finance management
    • High minimal deposit amounts
    • Limited investment options

    5. One Family Lifetime ISA

    OneFamily is on a mission to make investing for the future as easy as simple as possible. And this starts with specializing in just one type of Lifetime ISA, the stocks and shares LISA that can be opened and managed online. The shares and stock investments are then subdivided into lower risk (5-year) and high risk and longer-term (10-year) investment plans. You can switch between the two freely and without losing the interest already accrued in either.

    Deposit and fees The shares and stock LISA investments for either plan attract a fixed annual 1% management fee and an additional 0.3% account expenses fee. If you hope to invest here, you will have to part with £250 minimum lump sum investment or monthly debit minimums of £25.

    • Low management fees with the promise of high returns
    • Highly versatile as the account can be opened and managed online
    • Presents an investor with the choice between high- and low-risk investments
    • Higher than the average minimum deposit

    6. Newcastle Lifetime ISA

    Newcastle Building society runs what we consider a top cash lifetime ISA. At 1.1%, they offer the highest interest rate for cash ISA compared to any other reputable LISA service provider. The single percent may seem relatively low but it is not, especially if you still have to factor in the 25% bonus already topped up by the government.

    Some of the most unique factors about Newcastle LISA that we also find quite interesting include the fact that you can open and manage your LISA investments online, over the phone, or by post. Additionally, minimum investment here starts from £1, not to mention that your investments here are the Financial Services Compensation Scheme (FSCS) – insured to a maximum of £85,000.

    Our Rating

    • Insured, thereby minimizing risk exposure
    • Multiple ways of accessing and managing your account
    • No minimum deposit
    • Considerably low-interest rates

    7. Skipton Lifetime ISA

    Offered by the Skipton Building Society, the Skipton Lifetime ISA is yet another top cash investment option. Here, annual interest rates for the Cash LISA start from 1%, in addition to the 25% already advanced by the government.

    The minimum deposit for the Skipton ISA starts from £1 with the account management taking place online only. Just like with the case of Newcastle LISA investments, interests accrued here are payable every end of the financial year and are available for withdrawal of reinvestment.

    • Highly versatile as all processes are done online
    • Transferable between Lifetime ISA providers
    • Cash LISA carries with it fewer risks
    • One might consider the interest rate lower than the standard offered by banks
    • No growth of your savings

    Why do you need a lifetime ISA?

    • Helps you re-learn how to save:If you stopped and thought of all the reasons you are probably not investing (enough), one of the factors holding you back will probably be lack of incentives. Not when the taxes are up to our necks and interest rates on savings laughable. The promise of a tax-free savings account whose returns include government top up and interests from multiple investments should nonetheless be incentive enough to rekindle the need to save in you.
    • Savings compounded through investments guarantee maximal returns: Savings in this account have the potential of earning higher returns given that they are often invested in multiple lucrative markets like bonds, equities, and properties.
    • If you need the 25% boost to achieve a goal: Are you looking forward to buying a house in the near future or to consolidate as much wealth as possible to cushion retirement eventualities? The interest from investing your LISA deposits as well as the 25% government bonus should go a long way in helping you edge closer to the realization of your goals

    Everything else you need to know about Lifetime ISA

    • You are not obliged to deposit the same amounts every time: The maximum allowable for the Lifetime ISA stands at £4,000 per annum. You, however, don’t have to feel obliged to hit this target every year or deposit same amounts into the account every month. It is okay to close the year with just £2,500 in savings or deposit £1,200 in one month and £400 in another. You won’t be penalized for any of these and the proportionate balance will still be credited to the account.
    • Stocks and shares investments: There exist different types of lifetime Investment accounts including the less risky cash LISA that has lower returns and the more volatile shares and stocks investments that carry with them higher returns.
    • Inheritance in case of death: A lifetime ISA will also be deemed mature and eligible for free withdrawals in the case of the death of the contributor. They can then be inherited by your next of kin as part of their estate.
    • Spousal contributions: Lifetime ISA is not affected by marriage and spousal links. You can, therefore, operate two LISA accounts receive bonuses on both and even pool the proceeds earned in the individual accounts to buy a house.

    Take away

    Your lifetime ISA investment portfolio managers and your broker (for non-tax-free investments) are probably investing in the same markets and posting almost similar returns. But you stand to gain more when you use the tax-free LISA account to make these investments given that earnings here aren’t subjected to capital gains tax. More importantly, the government pledges to give you a bonus of £1 for every £4 you put into this account with the possibility of withdrawing it free of charge upon maturity or in the case you need to buy your first house. Not to mention that investments here are insured by the FSCS. It’s a high time you stopped and took count of what you stand to lose should you forego such a once-in-a-lifetime chance.

    Hargreaves Lansdown: Best Lifetime ISA Proivider

    Our Rating

    • No set-up or transfer-in charges
    • Wide investment choice
    • Ready-made portfolios available
    • Manage via website, HL app or phone
    Investments may fall as well as rise so you could get back less than you invest.

    Glossary Of ISA Terms

    Trading Platforms Glossary
    Cash ISA

    A cash ISA is a form of Personal Savings Allowance that works like ordinary savings account safe for the fact that you don’t pay tax on interests earned. It is tax-free savings account for UK citizens. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Stock and Shares ISA

    A share and stock ISA is a tax-free investment account provided by a brokerage that lets you invest in a wide range of securities including individual shares and stocks, trusts, and funds. Tax-free means that you don’t get to pay dividend tax or capital gains tax on the shares and stock incomes. The maximum you can invest in this ISA for the year 2020 is £20,000

    Trading Platforms Glossary
    Innovative Finance ISA

    Innovative Finance ISA is a tax-free investment account that lets you invest in the peer to peer lending platforms. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Junior ISA

    A junior ISA is a tax-free and long term Child Trust Fund that a parent or guardian can open for their underage children. A 16-year old can also open a Junior ISA but will only access the funds therein once they turn 18. The maximum you can invest in this ISA for the year 2020 is £4,368

    ISA Glossary
    Property ISA

    A property ISA is simply a share and stock ISA that will only invest in residential real estate properties. It is a share and stock ISA that buys solely into residential property portfolios.

    Trading Platforms Glossary
    Lifetime ISA

    A lifetime ISA is a savings account available to individuals between 18 and 40 years who are looking to save for a comfortable retirement. A Lifetime ISA account holder can deposit £4,000 into the account for 2020, and with every contribution, the government tops it up with a 25% bonus. You will not be able to contribute to the ISA once you reach 50 years and the funds can be used for retirement or re-channeled towards purchasing your first home.

    ISA Glossary
    Easy Access ISA

    An easy access ISA is simply a form of cash ISA that makes room for regular withdrawals of earned profits. It is mostly associated with cash ISAs that pay variable terms and allows you to withdraw the tax-free income gained here regularly. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Fixed-Rate ISA

    A fixed-rate ISA is a form of Cash ISA that pays fixed interest rates on savings. The funds in the account have to be locked for a predetermined period of time – usually between 1 and 5 years- with premature withdrawals attracting heavy penalties.

    ISA Glossary
    Retirement ISA

    A retirement ISA is a savings account available to individuals between 18 and 40 years who are looking to save for a comfortable retirement. A retirement ISA account holder can deposit £4,000 into the account for 2020, and with every contribution, the government tops it up with a 25% bonus. You will not be able to contribute to the ISA once you reach 50 years and the funds can be used for retirement or rechanneled towards purchasing your first home.

    ISA Glossary
    Help-To-Buy ISAs

    A Help To Buy ISA is a special saving account designed by the U.K. government to help its citizens save for a mortgage deposit for their first home. You can only save up to £200 per month into the help to buy ISA with the government topping you up with an additional 25% bonus. Plus, help to buy ISA is only available to individuals and couples looking to buy their first home.

    FAQs

    What is Lifetime IAS?

    A Lifetime Individual Savings Account (LISA) is a tax-free saving cum investment account specially designed to help you save towards buying your first home or saving for retirement. You can save up to £4000 into this account annually and earn a 25% bonus.

    Will I get the bonus I don’t hit the £4000/ year target?

    The £4000 investment figure is just there to guide you and not as a target that you must feel obliged to hit. You are free to invest as much or as little as you can afford. And you will not be penalized for failing to deposit in a given year or by depositing way less than the maximum allowable.

    When can I withdraw the amounts saved here?

    Upon maturity or when buying your first home. Maturity here kicks in when you reach 60 years of age or are terminally ill with less than 12 months to live or in case of death.

    What if I had an emergency that requires me to close the LISA account?

    The funds herein are always available for withdrawal when needed. Withdrawals outside the house purchase or maturity, however, attract a 25% holding fee on the amount being withdrawn and this has the net effect of reducing your initial deposits by 6%.

    What if the contributor passed on before hitting 60 years?

    Their Lifetime ISA is in such a case considered mature and eligible for free withdrawals as it passes on to their next of kin. Upon withdrawal, however, this amount is no longer treated as ISA income but inheritance and subject to estate tax.

    Are there restrictions to the type of house I can buy?

    Yes. You can only use this fund to buy your first house. More importantly, this should be the house you intend to live in and not a buy-rent property. Plus it must be within the United Kingdom and valued at £250,000 (maximum £450,000 if located in London)

    Who decides the minimum contributions for the different LISA investment accounts?

    Different investment vehicles require varied initial deposit amounts. The Lifetime ISA investor will thus decide on the minimum deposit amount allowed on their platform depending on the funds, shares, and equities they invest in. Cash LISAs, however, don’t require a minimum deposit.

    Can I open one for my daughter/son?

    Technically no, Lifetime ISA is an individual account that is only open to persons over the age of maturity. You can, however, help them contribute to the ISA upon hitting 18 years.

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    All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
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    Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.

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