Lifetime ISAs (LISAs) can help you build a deposit for your first home faster. But it’s important to understand the advantages and disadvantages before deciding if it’s the right product for you.
What is a lifetime ISA?
A lifetime ISA is a type of individual savings account (ISA) that’s designed to help you save for your first home, or to save extra for retirement.
You can pay up to £4,000 into a LISA each tax year (a period of 12 months running from April to April), and the government will top up everything you pay in by 25%. This means you can get up to £1,000 extra money each year!
You must be aged between 18 and 39 (inclusive) to open a lifetime ISA. You can pay money in - and receive the bonus - until you turn 50.
Is a lifetime ISA worth it?
If you’re saving up to buy your first home, the generous lifetime ISA bonus could get those house keys in your hands quicker.
However, there are rules and eligibility factors to be aware of, which means it’s not suitable for everyone. We’ve put together some lifetime ISA pros and cons to keep in mind before taking one out.
| Advantages | Considerations |
|---|---|
| You can get up to £1,000 bonus from the government each year | LISAs can only be used towards buying your first home in the UK, or for life after 60 |
| You won’t pay any tax on the money you withdraw | The home you buy with your LISA must cost £450,000 or less |
| If you’re buying a first home with a partner, they can use their LISA too | There’s a government withdrawal charge if you don’t use your LISA as the government intended |
| LISAs can be used for life after 60, as well as to buy your first home | The value of your LISA could change due to inflation (cash LISA) or changes in the stock market (stocks and shares LISA) |
Get up to £1,000 extra towards your first home deposit every year with a OneFamily Lifetime ISA
The advantages of lifetime ISAs
Things to be aware of with lifetime ISAs
How the government withdrawal charge works
A common mistake is thinking the withdrawal charge is simply paying back the bonus. The example below shows how the government withdrawal charge leaves you with less money than you put in:
You put in £1,000. The government adds £250 (the 25% bonus), making the total amount in your lifetime ISA £1,250.
If you then withdraw the lot (£1,250), you’ll be charged 25% (the withdrawal charge) of this amount.
25% of £1,250 is £312.50.
This leaves you with £937.50 (£62.50 less than the £1,000 you originally put in).
Choosing what’s right for you
If you’re saving for your first home, and you meet the eligibility criteria, a lifetime ISA can be a great way to save up your deposit faster thanks to the government bonus.
What if you have different savings goals, or you don’t meet the required criteria for a LISA? Our Stocks and Shares ISA, may be a better option for you.
Our Lifetime ISA and Stocks and Shares ISA invest in stocks and shares. This means there's good long-term growth potential, but the value of your investments could go down as well as up so you could end up with less money than you've put in.
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.
