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Lifetime ISA charges and fees

Written by Frankie Entwistle, Lifetime ISA Expert

There are two main costs to be aware of when you open a lifetime ISA: provider fees and the government withdrawal charge.

Like all ISAs, lifetime ISAs are tax-exempt, meaning you won't need to pay any income tax or capital gains tax on the money you take out, no matter how much your lifetime ISA has grown. But it's likely that you'll need to pay a fee to the provider managing your lifetime ISA.

You may also need to pay a government withdrawal charge when you take money out of your lifetime ISA, but this is only if your withdrawal goes against the lifetime ISA rules.

Let's take a closer look at the charges you can expect to pay if you open a OneFamily Lifetime ISA.

Lifetime ISA provider charges

OneFamily's Lifetime ISA fees

We charge just one straightforward fee for managing your lifetime ISA, the Annual Management Charge (AMC).

Our AMC is 1.1% of the total value of your lifetime ISA.

The AMC covers the cost of managing your investment each year. The charge is calculated daily but you'll only pay it once a year, and it's applied to the fund as a whole, so it’s never taken directly from your original investment.

We don't charge you any fund-level fees. If you are comparing fees from different providers, it's worth checking what other fees they may ask you to pay on top of the AMC, especially if it seems a lot lower.

There may be other costs in some exceptional circumstances, for example reissuing cheques. But if we need to charge you for anything else, we'll let you know before we do.

Do OneFamily's Lifetime ISA charges ever change?

These charges could change in the future. This can happen if the costs of running the fund, or of providing account services to you, go up.

We will always contact you in writing before making any changes. This forms part of our agreement, set out to protect your money and interests at all times.

Lifetime ISA minimum deposit

We believe in the power of starting small. That’s why all we have a low minimum opening deposit - you can open a OneFamily Lifetime ISA with a £25 monthly direct debit or £250 lump sum.

Our lifetime ISA invests in stocks and shares because we believe this gives it the best chance of out-growing inflation.

Returns aren't guaranteed and we recommend that you keep your money invested for five years or more.

Money invested for longer periods can increase the potential of better returns. This is because you'll have longer to ride out any fluctuations in the stock market.

Our Key Information Documents for the OneFamily Global Equity Fund and Global Mixed Investment Fund explain different possible scenarios and how they could affect your investment.

The total costs take into account one-off, ongoing and incidental costs.

The lifetime ISA government withdrawal fee

You will be charged the lifetime ISA government withdrawal fee if you:

Withdraw money from your lifetime ISA within 12 months of your first payment into it
Take money directly out of your lifetime ISA. As you can only withdraw money to buy your first home, this has to be through a conveyancing solicitor (you'll simply send them a form asking them to do this).

The exception is if you are 60 or over. At this point, you can withdraw as much as you like directly without being charged a penalty fee.

How much is the lifetime ISA government withdrawal fee?

The lifetime ISA government withdrawal fee is 25% of everything you withdraw from your account. To put it another way, you will only get 75% of the money you withdraw.

So, the less you take out, the smaller the fee you'll pay.

When you withdraw money, an additional amount is taken out to cover the fee and this is sent to HMRC on your behalf.

Find out more about the government withdrawal charge in our guide.

How is the government withdrawal fee calculated?

As you have to pay a 25% fee on everything you take out, you will only get 75% of any money you withdraw.

Let's say you want to move £200 from your lifetime ISA into your current account. To get your hands on the full £200, 75% of the withdrawal needs to be £200.

And, if 75% = £200, then 25% = £66.

So when you request £200, the total amount to come out of your lifetime ISA will be £266.

The £66 would be sent to HMRC and £200 would come to you.

This can be confusing because you might expect to pay just 25% of the £200 but, remember, it's 25% of everything you withdraw, which includes the money for the fee itself.

Pie chart showing the full withdrawal amount (£266) broken down into 25% (£66) and 75% (£200)

The calculation:

(The amount you want ÷ 75) x 100 = the withdrawal amount

Is the government withdrawal fee just paying back the government bonus?

No. The withdrawal penalty fee will always be higher than the amount of bonus you've received on the money you're withdrawing.

The government bonus is 25% of everything you pay into your lifetime ISA.
The government withdrawal fee is 25% of everything you withdraw from your lifetime ISA (including the bonus and the fee itself).

So if you paid in £200, you'll have received an extra £50 (25% of £200), leaving you with a balance of £250 (ignoring any investment returns).

If you then withdrew that full £250 (against the LISA rules), you'd get back only £187.50, while HMRC would get £62.50.

What if I need to take money out of my lifetime ISA?

The value of stocks and shares can fall as well as rise, so you could get back less than was paid in. If you're not sure a stocks and shares Lifetime ISA is right for you, please speak to someone you trust to give you advice.