Here’s our quick rundown of the different types of Lifetime ISA and how to get started with one.
Different types of Lifetime ISA
There are two types of Lifetime ISA – a Cash LISA and a Stocks & Shares LISA. Both allow you to contribute £4,000 every tax year. The government will give you a 25% bonus on everything you contribute – up to a maximum of £1,000 each year, totally free! 💸
For example, if you add £1,000, you’ll get a £250 bonus. Add £500, and you’ll get a £125 bonus. Over time, these bonuses can give you a real head start on the deposit for your first home. And, because the Lifetime ISA is a type of ISA (individual savings account), it benefits from being a ‘tax-wrapper’. This means that whether you’re saving or investing, you won’t pay any tax on your gains.
Here’s more on the differences between a Cash LISA and a Stocks & Shares LISA.
Cash Lifetime ISA
The Cash LISA is an individual savings account that lets you save your money towards your first home. 💰 In a Cash LISA, your money is held as cash, and you earn interest on any contributions.
If you’re looking to buy a home in the short- to medium- term (i.e. in less than five years), a Cash Lifetime ISA might be more suitable for you. By saving your money as cash, it’ll be more protected from risk – but the gains from interest can be lower than the gains from investments over the long term.
Stocks & Shares Lifetime ISA
The Stocks & Shares LISA is an individual savings account that allows you to invest your money towards your first home. 📊 In a Stocks & Shares LISA, rather than your money being saved as cash, it’s invested in the financial markets.
With investments, you’ll be open to more risk – because markets can fall as well as rise, and there’s no guarantee that your investments will rise in value. But, holding your investments over the long term has historically offered better returns than cash savings. 📈
This means a Stocks & Shares Lifetime ISA might be better suited to people who are looking to buy their first home in at least five years’ time.
How to open a Lifetime ISA
You can open a Moneybox Lifetime ISA at any time in-app. We offer both a Cash LISA and a Stocks & Shares LISA. 🏡
Our Cash LISA offers an interest rate of 0.85% AER (variable) – which includes a 0.25% base rate (variable) and a fixed one-year bonus interest rate of 0.60%.
Our Stocks & Shares LISA lets you grow your money over the long term by investing in our range of tracker funds. Tracker funds are a great way to invest because they automatically diversify your money over a range of different sectors and asset types – which helps to manage your exposure to risk.
To get started with a Moneybox Lifetime ISA, tap the button below or head in-app to the Accounts tab.
All investing should be long term (min. 5 years). The value of your investments can go up and down, and you may get back less than you invest. If you’re not sure which Moneybox Lifetime ISA is right for you, you may want to contact a suitably qualified financial adviser for help
A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.