With a lifetime ISA, you can get up to £1,000 of free money each tax year from the government! But it’s important to understand the rules and restrictions of lifetime ISAs to decide if it’s the right product for you.
Quick guide to who lifetime ISAs are for
There are two financial goals you can use your lifetime ISA towards:
- Saving up for your first home, and/or
- Saving up for life after 60.
You have to be between the ages of 18 and 39 (inclusive) to open one.
If you withdraw money from your lifetime ISA before you turn 60 for any reason other than buying your first home, you'll pay a 25% government withdrawal charge on everything you take out.
Lifetime ISAs are a type of ISA that come with a government bonus of 25% of everything you pay in. So, the more you pay in, the more you get from the government.
You can put in up to £4,000 into a lifetime ISA each tax year, so there's up to £1,000 a year up for grabs if you max out your allowance.
But lifetime ISAs aren't for everyone! Unlike a regular ISA, you can’t use the money in a lifetime ISA for anything you like. You can only withdraw money from our lifetime ISA to use it to buy your first home (after you turn 60, you can withdraw money for anything you like).
Let's take a look at who can open a lifetime ISA and the future money goals they're designed for. This can help you decide whether or not a lifetime ISA is right for you or not.
Get up to £1,000 extra towards your first home deposit every year with a OneFamily Lifetime ISA
Who can open a lifetime ISA?
You can open a lifetime ISA if:
- you’re between the ages of 18 and 39 (inclusive), and
- you’re a UK resident or a Crown servant living abroad.
Even if you for that criteria, you should make sure this type of account is right for your future goals.
What is a lifetime ISA for?
Lifetime ISAs are exclusively for:
- Saving up to buy your first home, and/or
- Saving up for life after 60.
You can use your lifetime ISA towards both these goals by keeping it open after you've bought your first home.
If you take money out of your lifetime ISA before you turn 60 for any reason other than buying your first home, you’ll have to pay a 25% government withdrawal charge on everything you withdraw.
This penalty fee is more than just repaying the lifetime ISA bonus as it's 25% of the money you've paid in and 25% of the bonus you've been paid (plus 25% of any investment returns).
Using a lifetime ISA to buy your first home
Lifetime ISAs are designed to help you buy your first home faster.
The home you buy must be:
- bought with a mortgage
- cost no more than £450,000
- the first property you've ever owned
- a home that you intend to live in.
When it comes time to buy, you'll instruct your conveyancing solicitor that you want to use a lifetime ISA towards the deposit and you'll need to fill out a form. Find out more in our guide to buying a home with a lifetime ISA.
Little tip for you - if you're planning on buying with someone else who is also a first-time buyer. You can both use a lifetime ISA. That means you could get up to £2,000 bonus between you each year, which can be used on the same property.
The lifetime ISA also works with other government schemes designed for first-time buyers, such as the First Homes scheme.
Once you’ve used the money in your lifetime ISA to buy your first home, you can then leave your account open and keep using it to put extra money away for retirement!
Take your first step to home ownership with a OneFamily Lifetime ISA
Using a lifetime ISA to save extra for retirement
You can pay into your lifetime ISA until you turn 50. Your money will then stay in the account until you turn 60 and you're allowed to withdraw it.
If you withdraw before this, you'll be charged the government withdrawal charge (unless it's to buy your first home).
If you're wondering whether to put money away for retirement in a lifetime ISA or a pension, it’s important to keep in mind that, in most cases, a pension may be the best way to increase your retirement savings. However, you can use them for different goals, for example your lifetime ISA could be for the holiday-of-a-lifetime when you turn 60 while your pension is intended for living expenses post-retirement.
Open a OneFamily Lifetime ISA
Our Lifetime ISA comes with a 25% government bonus, worth up to £1,000 a year!
Our Lifetime ISA invests in stocks and shares, so the value is likely to go up and down over time. This is normal for this type on investment, but it means there is a risk you could get back less than you put in if you withdraw at a time when the value is lower.
