Best Lifetime ISA (LISA)

A Lifetime ISA (individual savings account), often called a LISA, is an account that helps you increase your savings either to buy your first home or to supplement your retirement fund. If you withdraw money from a Lifetime ISA for any reason other than buying your first home or retirement after age 60, you’ll pay a 25% government withdrawal charge, which effectively means you lose some of your own contributions, not just the government bonus.

You can only open a Lifetime ISA if you're aged between 18 and 40. You can deposit up to £4,000 in a single tax year, which counts towards your annual ISA allowance. The government will top up your contributions by 25%, up to a maximum of £1,000. You can only access the funds in a Lifetime ISA to buy your first home with a mortgage or after the age of 60 for retirement.

Yes, a Lifetime ISA is an excellent way to grow your savings to help you buy your first home or provide additional income during retirement. You even earn extra tax-free interest on top of your contributions and government top-ups.

Yes, you can have both a Lifetime ISA and a Cash ISA. You'll be charged a 25% fee if you withdraw money from a LISA for any reason other than to buy a home or for retirement. Accessing money in a Cash ISA is more flexible, so you can use the two accounts to save for different goals. You can contribute up to £20,000 in total across any ISAs you hold, with no more than £4,000 of this amount going into your LISA.

If you withdraw money from a Lifetime ISA for any reason other than buying your first home or after the age of 60, you’ll be charged a 25% withdrawal fee on the amount withdrawn. This means you’ll get back less than you put in, not just losing the government bonus, but effectively losing some of your own money too. For example, if you contributed £1,000 and the government added £250, withdrawing the £1,250 early would incur a £312.50 penalty, leaving you with £937.50.

Yes, a Lifetime ISA can be used alongside a workplace pension for retirement saving. However, for most people who are employed, a workplace pension is usually the better primary retirement vehicle because of employer contributions (essentially free money). A LISA is often more useful for saving towards a first home, or as a supplementary retirement savings tool if you’ve maximised your workplace pension contributions or are self-employed.

Yes, a Lifetime ISA is open to anyone aged 18–39, whether employed, self-employed or not working. For self-employed people, a LISA can be a particularly useful retirement savings tool alongside a personal pension or SIPP, as there’s no employer contributing on your behalf. You still benefit from the 25% government top-up on up to £4,000 per year, plus any interest or investment growth on the whole pot.