What is a Lifetime ISA and who can open one
A Lifetime ISA (LISA) is a tax-free savings account designed to help UK residents aged 18 to 39 save for their first home or retirement. You can contribute up to £4,000 per tax year and receive a 25% government bonus on top, maximising your savings with up to £1,000 extra annually. To open one, you must be a UK resident aged 18-39, and the account remains open until age 50, though contributions stop after 50.
Eligibility starts at 18, with no upper age limit for holding the account, but you cannot open a new LISA after turning 40. The government bonus applies only to contributions, not existing savings, and funds can be withdrawn penalty-free for a first home up to £450,000 or at age 60. There are two main types: cash LISAs for steady interest and stocks and shares LISAs for potential higher growth through investments.
Best cash Lifetime ISA providers
Top cash Lifetime ISA providers in the UK offer competitive interest rates up to 4.30% AER as of October 2025, making them ideal for low-risk savers seeking guaranteed returns. Providers like Paragon Bank and Nottingham Building Society lead with high AERs and no withdrawal penalties beyond the standard LISA rules, while keeping fees minimal or zero.
Key picks include:
Paragon Bank at 4.30% AER with a £1 minimum deposit and easy online access.
Nottingham Building Society offering 4.20% AER, praised for customer service in reviews.
Nationwide, a major lifetime isa providers for accessibility, with 3.50% AER and branch support.
User reviews on Trustpilot highlight Paragon’s reliability, scoring 4.5/5, though some note slower app updates. These cash options suit beginners avoiding market volatility, with the government bonus boosting overall yields.
Tip: Maximise your bonus
Contribute the full £4,000 early in the tax year to claim the £1,000 bonus sooner, and set up direct debits for consistent saving. Always check current AERs, as they fluctuate with base rates.
Best stocks and shares Lifetime ISA providers
For growth-oriented savers, the best stocks and shares Lifetime ISA providers like Hargreaves Lansdown and AJ Bell provide diverse investment options with platform fees under 0.45%. These accounts invest in funds, shares, or ETFs, potentially outpacing cash rates over time, but with market risks involved.
Standouts are:
Hargreaves Lansdown, featuring over 3,000 funds and a 0.45% annual fee, ideal for diversified portfolios.
AJ Bell with 0.25% custody fees and low-cost index trackers, earning high marks for research tools.
Moneybox, user-friendly for beginners, charging 0.45% plus fund fees, and integrating with apps for round-up investing.
Reviews commend AJ Bell’s low costs (4.6/5 on Trustpilot), though Hargreaves Lansdown users appreciate extensive choices despite slightly higher fees. Consider your risk tolerance; past performance shows average annual returns of 5-7% net of fees, per FCA data.
To explore more, check our guide on the moneybox lifetime isa.
Comparing Lifetime ISA providers: Fees, features, and reviews
When comparing Lifetime ISA providers, prioritise low fees, bonus eligibility, and user ratings to find the best fit for your goals. Cash providers excel in stability with AERs around 4%, while stocks and shares options offer growth potential at 0.25-0.45% annual charges. Martin Lewis from MoneySavingExpert recommends low-cost platforms like AJ Bell for value, as per his top tips.
Key factors include minimum deposits (£1-£500), app usability, and withdrawal ease, with all providers FCA-regulated for security. User reviews average 4/5 across platforms, with complaints mainly on transfer times.
| Provider | Type | AER/Fees | Min Deposit | Bonus Eligible | Rating (Trustpilot) |
|---|---|---|---|---|---|
| Paragon Bank | Cash | 4.30% AER | £1 | Yes | 4.5/5 |
| Nottingham BS | Cash | 4.20% AER | £1 | Yes | 4.4/5 |
| Hargreaves Lansdown | Stocks & Shares | 0.45% platform | £100 | Yes | 4.2/5 |
| AJ Bell | Stocks & Shares | 0.25% custody | £500 | Yes | 4.6/5 |
| Moneybox | Stocks & Shares | 0.45% + fund fees | £1 | Yes | 4.3/5 |
For detailed rates, see Moneyfacts comparisons. Which? notes that over 500,000 LISAs hold average balances of £5,000 as of 2024, underscoring their popularity.
How to choose and switch Lifetime ISA providers
Select Lifetime ISA providers by assessing your risk appetite, fees, and features like mobile apps or investment tools. Cash suits conservative savers, while stocks and shares fit long-term growth seekers. Use comparison sites to verify 2025 rates and read independent reviews for real-user insights.
Switching is straightforward via BACS transfer, taking 2-4 weeks, with no impact on your bonus if done correctly. Avoid pitfalls like exceeding the £4,000 allowance across ISAs. For 2025 updates, providers like Moneybox have enhanced apps; consult Which? guides for eligibility.
Discover the best lifetime isa options overall.
Frequently asked questions
What is a Lifetime ISA and how does it work?
A Lifetime ISA is a UK government-backed savings scheme for first-time homebuyers or retirement planning. You can save up to £4,000 yearly from age 18-50, earning a 25% bonus up to £1,000, with tax-free growth. It’s distinct from standard ISAs due to the bonus and penalties for non-qualifying withdrawals, making it ideal for long-term goals like buying a home under £450,000.
Who can open a Lifetime ISA?
UK residents aged 18 to 39 can open a Lifetime ISA, with contributions allowed until age 50. You must not have owned a property before, except in shared ownership schemes. Non-UK residents or those over 40 cannot start new accounts, but existing holders can continue; check GOV.UK for residency rules to avoid ineligibility issues.
What are the best Lifetime ISA rates in 2025?
In 2025, top cash Lifetime ISA rates hit 4.30% AER from providers like Paragon Bank, per Moneyfacts data. Stocks and shares options vary by investments but average 5-7% long-term returns net of fees from AJ Bell or Hargreaves Lansdown. Rates fluctuate with economic changes, so compare providers quarterly and factor in the 25% bonus for effective yields over 5% on cash.
Can I transfer my Lifetime ISA to another provider?
Yes, you can transfer your Lifetime ISA to another provider without losing the government bonus, via a free BACS or CHAPS process. It typically takes 2-4 weeks, and providers handle it directly to protect your tax-free status. However, ensure the new provider offers better rates or features; poor timing could mean missing interest, so plan ahead using tools from MoneySavingExpert.
What is the Lifetime ISA withdrawal penalty?
The penalty is 25% on the entire pot, including the bonus, for non-qualifying withdrawals before age 60 or without buying a first home up to £450,000. This effectively claws back the bonus plus 6.25% of your contributions, deterring early access. Qualifying uses like retirement or home purchase incur no penalty, but always confirm eligibility to avoid losing gains built over years.
How much government bonus can I get on a Lifetime ISA?
You receive a 25% bonus on contributions up to £4,000 annually, equalling £1,000 maximum per tax year. The bonus applies only to new contributions in cash or stocks and shares LISAs and is paid within 30 days. Over time, with consistent saving, it can add tens of thousands; for example, £4,000 yearly for 10 years yields £10,000 in bonuses, boosting retirement or home funds significantly.
What are the differences between cash and stocks and shares Lifetime ISAs?
Cash LISAs offer fixed interest like 4.30% AER with no market risk, suiting cautious savers via providers like Nottingham Building Society. Stocks and shares LISAs invest in markets for higher potential returns (around 5-7% historically) but face volatility, with fees from platforms like Moneybox. Both qualify for the 25% bonus, but choose based on timeline—cash for short-term home buys, shares for long-term growth—considering your risk profile and diversification needs.
