What’s a LISA?
LISA (pronounced lie-sa) is short for Lifetime ISA. It’s a tax-free savings account and Government scheme designed to help you save for your retirement.
It works like this. For every £4 you save – up to an annual total of £4,000 – you’ll get a £1 bonus from the Government. That means you could earn up to £1,000 in bonuses every year until you turn 50. Or, think of it this way: if you open an account at the age of 18 and put in £4,000 each year, up to the maximum age you can earn bonuses, you could tot up as much as £32,000 in free Government bonuses towards your retirement. And that’s not including the interest on top, which you won’t have to pay tax on either.
The LISA is open to people aged 18-39, and you can only use it to fund your retirement from the age of 60. LISA deposits count towards your annual ISA allowance, but you can put away up to £4,000 per year. To help you decide whether it’s the savings account for you, we’ve summed up all the details below.
Things to know
Tax-free savings (also known as Individual Savings Accounts or ISAs) accounts are simple, really: with accounts like these you won’t have to pay tax on the interest you earn. There’s also a cap on how much you can add each tax year, depending on your circumstances, and keep in mind that the tax rules around ISAs could change.
AER, or Annual Equivalent Rate, is designed to make savings accounts easier to compare. The AER will show you what your interest rate would be if interest was paid back into your account. For accounts that pay interest annually, the gross rate and the AER should be the same. For accounts that pay interest monthly the AER will be slightly higher than the gross rate. This is because if you leave your monthly interest in the account you’d start to earn interest on the interest.
Lifetime ISA FAQs