A Lifetime ISA (LISA) is a UK savings account that adds a 25% government bonus to your deposits, up to £1,000 per year.
Key Features
| Feature | Details |
|---|
| Maximum deposit | £4,000 per year |
| Government bonus | 25% (up to £1,000 per year) |
| Age limit | Open 18-39, contribute until 50 |
| Withdrawal penalty | 25% (effectively 6.25% loss) |
| Bonus paid | Monthly |
What You Can Use It For
| Purpose | Allowed? |
|---|
| First home purchase (under £450K) | Yes |
| Retirement (age 60+) | Yes |
| Any other reason | No (25% penalty applies) |
Cash LISA vs Stocks & Shares LISA
| Type | How It Works | Best For |
|---|
| Cash LISA | Like a savings account, fixed interest | Buying a home within 3-5 years |
| Stocks & Shares LISA | Invest in funds and shares | Retirement (long-term), 5+ years away |
The Bonus Explained
| Deposit | Bonus | Total |
|---|
| £1,000 | £250 | £1,250 |
| £2,000 | £500 | £2,500 |
| £3,000 | £750 | £3,750 |
| £4,000 (max) | £1,000 | £5,000 |
Maximum bonus over lifetime: £32,000 (deposit £128K, bonus £32K).
LISA vs Help to Buy ISA
| Feature | LISA | HTB ISA |
|---|
| Max deposit/year | £4,000 | £2,400 |
| Bonus | 25% (up to £1K/year) | 25% (up to £3K total) |
| Max home price | £450K national | £250K / £450K (London) |
| Withdrawal penalty | 25% | None (just no bonus) |
| Can be used for retirement | Yes | No |
LISA is generally better than HTB ISA for most first-time buyers.
LISA for Retirement
| Age | What Happens |
|---|
| 18-39 | Open account, deposit up to £4K/year |
| 40-49 | Can still contribute, no new accounts |
| 50 | Contributions stop |
| 60 | Withdraw tax-free (including bonus) |
LISA vs Pension
| Factor | LISA | Pension |
|---|
| Tax relief | 25% bonus | Income tax relief (20-45%) |
| Withdrawal tax | Tax-free | 25% tax-free, rest taxed as income |
| Access age | 60 (for retirement) | 57 (rising to 58) |
| Employer contributions | No | Yes |
| Inheritance Tax | Included in estate | Usually outside estate |
Penalty for Early Withdrawal
| Action | Effective Loss |
|---|
| Withdraw £10,000 | Charged 25% = £2,500 |
| You get back | £7,500 |
| Effective loss | 6.25% (you lose some bonus + some of your own money) |
Providers
| Provider | Type | Fee |
|---|
| Moneybox | Cash + S&S LISA | 0.45% (S&S) |
| Nutmeg | S&S LISA | 0.95% |
| Hargreaves Lansdown | S&S LISA | 0.45% |
| Skipton Building Society | Cash LISA | 0% |
Bottom Line
A LISA gives you a 25% bonus towards a first home or retirement. Deposit up to £4,000 per year for a £1,000 bonus. Use a cash LISA for a home purchase within 5 years, and a stocks & shares LISA for retirement. Withdrawal for any other reason triggers a 25% penalty, so don’t deposit money you might need. Max lifetime bonus is £32,000.
This content is for educational purposes only. Not financial advice. Do your own research before investing.