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Should I invest in a lifetime ISA?

14/03/2022

More and more younger people are starting to invest for the first time – predominantly driven by the rise of investing apps and the continued popularity of cryptocurrency. These investors tend to be focused on shorter term returns – but what about those who want to invest for their longer term future? 

One option for younger investors who want to play the long game is a Lifetime ISA. Find out below what these are all about, and decide whether a Lifetime ISA is right for you. 

 

How do Lifetime ISAs work? 

A Lifetime ISA is a tax-free investment, designed for those who are aged between 18 and 39 at the time of opening. Launched in 2017, they allow investors to save either to get on the property ladder, or for retirement. 

For every £4 you put into the ISA, the Government will add a further £1 (paid monthly) – up to a maximum of £1,000 per year, and up until you reach your 50th birthday. 

 

The pros of a Lifetime ISA

Lifetime ISAs are easy to open and manage: many providers offer online management, and often, you can start your investment with as little as £1. What’s more, the Government’s 25% contribution on investments of up to £4,000 per year gives you a guaranteed return, regardless of interest rates. 

A Lifetime ISA may be a suitable choice for those who are unwilling to take high levels of risk, and for those who are looking to invest either for property purchase or retirement – in both of these cases, withdrawals are tax-free. Withdrawals can be made at any time, however, there are requirements that must be met to qualify for the 25% Government bonus. 

 

What are the negatives of Lifetime ISAs?

Interest rates on Lifetime ISAs are generally low, so they may not suit those looking for higher returns. What’s more, as a Government-backed offering, there is no guarantee that this investment type will continue to be offered in the years to come. 

Lifetime ISAs are designed to be used for property purchases and retirement income. While it is possible to withdraw your money at other times, this will be subject to a 25% exit charge, meaning that it may not suit those who think they may be likely to need to withdraw sooner. 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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