Your Lifetime ISA Questions: The Sensible to the 'Silly'

You’ve probably heard of the ‘Lifetime ISA’ – but what actually is it, and will opening one benefit you – and your finances? Oh, and can you spend the balance you’ve accumulated in your account when you like, too?

When it comes to Lifetime ISAs (known for short as LISAs), no query is too silly. After all, it’s important to ensure all your burning questions don’t go unanswered when it comes to your hard-earned money.

In this article, the team here at Unity Mutual delve into the world of Lifetime ISAs via the following queries…


What is a Lifetime ISA?


In short, if you’re over 18 and under 40, a Lifetime ISA helps you buy your first property and/or save for retirement by giving you a government bonus of 25% on top of the money you put in.

For example, if you deposit £4,000 into your account annually, the government will top your savings by an additional £1,000, which is the maximum you can receive in any given year.

As well as the age restrictions, there are stipulations around what the money can be used for with penalties in place if it’s not.  Don’t let this put you off, but make sure you understand all of these before you commit.  You can find lots of information here.


How will a Lifetime ISA benefit me?


Just like a normal ISA, you won’t pay tax on any interest, income or capital gains from cash or investments held within your account. Plus, as the government gives you a 25% bonus on the money you put in, it’s a way to make saving for your first home a little bit easier.

If that doesn’t sound tempting enough, Unity Mutual will give you a generous, market-leading 1.5% interest* on top of that.

*We currently offer the market-leading interest rate available to the general public. Based on independent research conducted every six months. Data correct, as of 1st October 2021.


I’m not sure I understand how saving in a Lifetime ISA works; can you tell me more?


You can pay up to £4,000 into your Lifetime ISA each tax year. This forms part of the overall ISA contribution limit of £20,000. The savings you accumulate will retain their tax-free basis for as long as you keep them within your Lifetime ISA; your account does not close when the tax year ends.


Can I have more than one type of ISA?


Great question.  You can split your ISA allowance for a tax year across different types of ISA available? You can only open one of each type of ISA each year.

For example, you could choose to invest £4,000 in a Lifetime ISA, £6,000 in a Cash ISA and £10,000 in a Stocks and Shares ISA.



Is the Lifetime ISA ending? 


While the Help to Buy ISA unfortunately had a shelf life, the Lifetime ISA is going strong at banks and friendly societies like ours. A popular way to save, the LISA helps people like you put money away for something important, such as your first property.


How long does my money need to be in a lifetime ISA?

Lifetime ISAs provide a great way to save for your first home or for later life. You will need to wait 12 months from the date of your first payment into the account before being able to get your foot on the property ladder.  

While you can’t deposit more than £4,000 per year into your Lifetime ISA, this will be topped up by the government by up to £1,000 annually, which will go towards saving for that house deposit, or for retirement – so, the more you put in, the more you’ll get out.

That said, the government will stop contributing when you hit the age of 50, so it’s vital to make the most of your LISA now.


Anything else I should know?

There is lots to know and understand before making any kind of investment and we’d always recommend you do your research, but one of the other key things to remember is that if you’re using the LISA to buy your first home, the property you buy must not exceed £450,000.


Are Lifetime ISAs only for people called Lisa?

Absolutely not! They’re for people who are:

  • aged between 18 and 39
  • are resident in the UK, or a Crown employee (or their spouse/civil partner) working overseas.

You don’t need to be named Lisa, but Lisa’s are, of course, welcome to apply.


Can I open a Lifetime ISA with someone else?

No, even if they’re called Lisa, you can’t hold a Lifetime ISA with, or on behalf of, someone else.

However, if you’re planning to purchase a house with your partner or a friend you could both use a LISA towards the deposit, although the cap on a house worth £450,000 or above remains the same, but this is a good way of gathering more of a deposit on that first home. 


I want to withdraw my money to buy something other than a first property; can I do that?

Be very cautious here! You are free to access your money when you like – but as the government wants to encourage saving, if you need to make a withdrawal for any other reason than to use against a first property, a withdrawal penalty of 25% will be imposed.

Withdrawals for something other than a first home or retirement are known as ‘unauthorised withdrawals’.

The Lifetime ISA government withdrawal charge recovers any Lifetime ISA government bonus you have received, as well as any investment growth on that bonus. If you withdraw your funds for something other than buying a home, then you get back less money than what you paid in. So, if you do think you will need the money to purchase something else, perhaps a different savings options may be the better option. 

The Flexible ISA from Unity Mutual makes investing easy over the medium to long-term, based on the growth potential of the stock market. Find out more about the benefits associated with this account as well as the terms and conditions by clicking the link above.


How do I keep on top of how much money I have in my LISA?

At Unity Mutual, we’ll make sure you know exactly how much you have in your Lifetime ISA. We’ll do this by sending you an annual statement, which will show the value of your LISA.

You can also get in touch with us anytime to enquire about the status of your account.


Do I need to commit to monthly contributions – and how much do I need to deposit into my Lifetime ISA to set it up?

With Unity Mutual you don’t need to commit to deposit a certain amount into your account each month, but the more you add, the more you’ll receive from the government in top ups. Plus, you can open your account for as little as £1.  Other providers may have different rules though, so it’s important to double-check.


How do I apply for a Lifetime ISA; is the process easy?

At Unity Mutual, we’ve made it as easy as possible to start saving for your first property – and you can apply for a Lifetime ISA via our site.

To apply, you’ll need your National Insurance number (which you should be able to find on your payslip, P45 form or P60, a letter from HMRC or a letter from the Department of Work & Pensions).

Want to know more about the Lifetime ISA from Unity Mutual? Do not hesitate to get in touch with our team, who will be more than happy to answer any of your questions and talk through the terms and conditions. 



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