Multiple Lifetime ISAs
A Lifetime ISA (LISA) allows you to save money in a tax-free account to buy your first home or retire with, and the best part is that you could earn a 25% bonus on top of what you put in. These benefits are designed to reward you for saving, but could you still reap these benefits if you opened multiple LISAs?
In our guide, find out how many Lifetime ISAs you can actually open, how much money you could realistically make by doing so, and whether any other type of savings product may be more suitable for your circumstances.
How many Lifetime ISAs can I have?
You’re free to open as many Lifetime ISAs as you like from the ages of 18-39, however, you’re only allowed to open one each tax year, and you can only claim the UK Government’s 25% bonus on one. Currently, you can put £4,000 a year inside a LISA and get free cash on what you save – so, for every £4 you save, you’ll earn £1.
While you won’t get a bonus with each LISA account you set up, you could still benefit as you won’t pay tax on any interest or investment returns. The rates you receive will also depend on whether you choose a cash or a stocks and shares LISA, as you have the potential to get greater returns with a stocks and shares-based account, though there’s also a higher risk of you losing out in periods of stock market volatility.
Another thing to bear in mind is that once you turn 50, you won’t be able to pay into your LISA and the government will stop topping up your account with the 25% bonus. Until then, your funds would accrue until you could access them at age 60.
To ensure that you’re getting the most out of your hard-earned cash, speak with an expert financial advisor. They can work with you to recommend the right products that could make your cash bloom, rather than being stuck earning little interest in a low-performing savings vehicle.
You can have two Lifetime ISAs, though you cannot open both in the same tax year and you cannot pay into both during the same tax year. However, the good news is that couples looking to purchase their first home can both take out their own Lifetime ISAs and benefit from the 25% bonus from the government.
For example, if two individuals saved £200 a month into their own ISA over a five-year period, they would have saved £12,000 from their own cash and earned a £3,000 bonus, giving them £15,000 each (excluding any interest earned). In total, they could combine their money and put a healthy £30,000 towards their first home.
Couples saving for their retirement would also still get to enjoy a 25% bonus on their savings if they took out separate accounts. Say, for example, that you and your partner took out a LISA separately and saved £200 per month at age 30 and paid into the scheme for 19 years; you could have saved £48,000 already, plus gained a £12,000 bonus. On top of interest earned, you could be walking away with a tax-free pay out of £77,144.
For more accurate rates and product recommendations to match your lifestyle and savings goals, it’s best to speak with an advisor.
You can open three, four or even 20 Lifetime ISAs in your lifetime, though you can only pay into one account each tax year, and you’ll still only be able to claim you 25% bonus on one of them, not all. So, if you’re looking to take out multiple Lifetime ISAs in order to maximise your savings, you may be better off with multiple other ISAs.
For more information, read our ‘Can I have multiple types of other ISAs’ in our section below.
How much money could I earn?
With an individual LISA, the amount of money you could make through your Lifetime ISA will depend on a combination of various factors, including:
- How much you save into your account per year
- What age you start saving
- What the rate of interest is
- Whether you opt for a cash LISA or a stocks and shares LISA
- Your attitude to risk (aka low-risk, balanced, or high-risk)
- If you have to pay any account-associated fees
By working with an independent financial advisor, you will be able to look at your needs and circumstances and make highly tailored recommendations. If multiple ISAs is something of interest to you, they can also suggest the best ISAs, savings accounts or personal pensions so that you can meet your investment goals with the right products
Can I have multiple types of other ISAs?
Yes, you can own other types including cashISAs, stocks and shares ISAs and Help to Buy: ISAs (though this closed to new applicants in 2019).
For example, you could open up a Lifetime ISA and max out the annual limit with £4,000, then open a cash ISA plus a stocks and shares ISA all within the same tax year and still put £16,000 into them – just so long as you don’t go over the £20,000 annual ISA limit (for the tax year 2019/2020), you can divide your funds up as you wish.
Transferring between ISAs
If you want to transfer your Lifetime ISA funds into another type of ISA (such as cash, stocks and shares or innovative finance), you would incur a 25% withdrawal charge – so you could be walking away with less than what you paid in.
The good news is that it’s much easier to transfer funds from a different ISA into a Lifetime ISA and you won’t face any charges, though bear in mind that you can’t go over your £4,000 annual limit. For example, if you’ve earned decent dividends via a stocks and shares ISA, you may
Speak to an expert
If you’re wanting to open multiple ISAs including a LISA to maximise the returns on your investments, a financial advisor can recommend the best products available thanks to their whole-of-market access – and most likely find you deals that aren’t available to the general public.
Want to start building your investment portfolio? Make an enquiry and we’ll match you with an expert for a free, no-obligation chat. We only work with the best advisors in the business, and they are all regulated by the Financial Conduct Authority for your peace of mind.