How to open a Lifetime ISA

A Lifetime ISA can be used to buy a first home or to help fund your retirement. The returns or interest you make are tax free and you’ll even get a government bonus every year.

However, while they can be a great way to save there are rules and restrictions – especially around the value of your first home and when you can access the money.

Here we look at how to open a Lifetime ISA, what’s required, and where to do it.

In this article

1 Can I open a Lifetime ISA?

2 How to open a Lifetime ISA

3 Where to open a Lifetime ISA

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Can I open a Lifetime ISA?

First things first, not everyone can open a LIfetime ISA (LISA). To open one you will need to be:

Aged 18 to 39
A UK resident
Happy to use the money for a first home (worth up to £450,000) or wait until the age of 60 and be aware you will be penalised if you take the money out for another reason.

If you want to open a Lifetime ISA, here are the steps to follow:

Is a Lifetime ISA right for me?

Lifetime ISAs are a good way to save for a first home or a retirement and you can put away up to £4,000 each tax year, with the government adding an extra 25%. But they’re not the only option. Before you open one it’s important to understand the rules around how they work and also to look at alternatives.

To help you decide, here are some scenarios where a Lifetime ISA could be a benefit:

I want some extra help to buy my first home, worth no more than £450,000
The government bonus will help to grow my savings (either for a first home or retirement)
I’m aware I can’t access the money until I turn 60, if using it for a retirement pot

And here are some situations where a Lifetime ISA might not be the best option:

I’ve owned a property before
The home I want to buy is worth more than £450,000
I would prefer to save into a traditional pension instead
I want to be able to access this money when I might need to

Is a cash LISA or investment LISA best?

You can choose from a cash Lifetime ISA or a stocks and shares Lifetime ISA. A cash LISA pays interest on the money in the account (in a similar way to a traditional cash ISA). Your savings grow as the interest is paid.

An investment Lifetime ISA is invested, usually in the stock market, and the aim is that the returns help to grow your savings. While there are no guarantees, this option usually has higher returns.

It’s also worth remembering that a Lifetime ISA isn’t the only option – you can open one alongside another savings product, such as a cash ISA or a pension.

Which is the best Lifetime ISA provider?

There are lots of providers offering LISAs so it’s important to compare accounts before you settle for one. Our best Lifetime ISA tables can give you some options, it’s also worth thinking about the following:

What is the rate of interest or the average returns for the account?
How can you access the account (online, with an app, in a branch or on the phone)
Are there are limits to how much you can put into the account, or minimum amounts you need to deposit to open one?
Does the account allow you to transfer a previous Lifetime ISA into it? And are there age restrictions for this?
What is customer service like with the provider and what do existing customers say about it?
Are there any extra benefits with the account which you would use?

What documents do I need to open a Lifetime ISA?

You will usually need to provide the following documents when you open a LISA:

Your name and contact details
Proof of your ID (usually a passport or driving licence)
Proof of your address – a recent utility or council bill can show this
National insurance number
The bank details of the account you would like to link to the Lifetime ISA

How do I apply for a Lifetime ISA?

This depends on the type of Lifetime ISA you want to open. You can usually choose between applying online, via an app, in a bank branch, or sometimes over the phone.

When can I start putting money in?

As soon as your account is open and you’ve been given the details, you can start transferring in money. There may be a minimum deposit you need to pay in before the account is opened.

How is the government bonus paid?

The government bonus of 25% is usually paid every month and is based on how much money you put in the previous month.

When can I withdraw money?

You are allowed to withdraw money at any point but the only time you can do this without facing a penalty, of 25% of the total amount you take out, is:

When using the money to buy a first home worth up to £450,000
If using the money for a retirement at the age of 60 or over
If you have been diagnosed with a terminal illness

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Where to open a Lifetime ISA

You can open a Lifetime ISA in several ways, and how you do it will depend on the provider you have chosen.

The main options are opening it online, through an app, in person in a bank branch or by phone or post.

There may also be restrictions around how you can manage the account, if it’s an app-based account for example there may not be a branch you can visit.

Can I open a Lifetime ISA?