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Stocks and Shares ISAs – including Lifetime ISAs – have become a popular investment method for Brits. Recent figures show that around 2.2 million of us had an Investment ISA in 2019, with the average account worth £27,000.  

One ISA type to gain traction in recent times is the Lifetime ISA or LISA. In fact, Hargreaves Lansdown say that the number of people with one of these accounts rose by 27% in the year to February 2021. Also, 38% of those people who have one of their Lifetime ISAs had reached the upper limit on their ISA allowance by the end of February, compared to 33% last year.

The average investor has £9,270 in their Hargreaves Lansdown Lifetime ISA account, which is a 30% increase from a year ago. This review will look at what a Lifetime ISA offers, as we look to see why it is now so popular.   

What Is a Lifetime ISA?

You might see Lifetime ISAs referred to as LISAs. They were launched in 2017, with the main idea of helping people to save or invest for their first property purchase, or for their retirement years. It is a fairly simple savings product and the following are the main features you need to know about.

For even more info download the Free Lifetime ISA Guide* from Hargreaves Lansdown.

• You need to be between the ages of 18 and 39 to open a Lifetime ISA
• You can keep paying in until the age of 50.
• Only UK residents and crown servants working abroad can open a Lifetime ISA.
• The most you can add to a Lifetime ISA is £4,000 in each tax year.
• The government provides a 25% top-up bonus annually up to £1000.
• You can pick up a maximum bonus of £1,000 in a single tax year. 
• Like all other ISAs, the gains within the account are tax-free. (Some people may pay tax on investment gains once they are outside of the Lifetime ISA)
• Whatever you pay into a Lifetime ISA is removed from your overall ISA allowance. This is currently £20,000 for 2020/21. So if use the full £4,000 on your LISA, the overall allowance reduces to £16,000 for other types of ISA.
• There are various types of ISA. These include Cash, Stocks and Shares or Innovative Finance ISAs.
• You can use the money to buy your first home up to £450,000 (this limit applies anywhere in the UK).
• After the age of 60, it can be used for retirement purposes. If you are diagnosed with a terminal illness, you can access the money early.

What Does It Cost?

Setting up a Lifetime ISA is free, as is using it. Yet, a 25% penalty is charged if you take the money out for anything other than the reasons mentioned above. This has been temporarily reduced to 20% due to the pandemic, until April 2021.

Regarding the charges made by Hargreaves Lansdown, they say that the annual charge will never be more than 0.45%. On funds, the 0.45% rate is used up to £250,000. After this is reached, the charge drops to 0.25% up to £1 million and 0.1% up to £2 million.

With shares, a 0.45% charge is made but it is capped at £45 per year. Their site gives you a neat breakdown with an example to make this clearer.

What Do Other People Say About It?

The majority of reviews for Hargreaves Lansdown are positive. It is with good reason that it is one of the biggest financial firms in the UK. Their customer service and comprehensive investment platform are points that people seem to be happy with.

In terms of specific Hargreaves Lansdown Lifetime ISA reviews, there are relatively few of them around. It should be pointed out that not many companies offer Stocks & Shares LISAs, with most only offering a cash LISA. 

According to an update from Hargreaves Lansdown recently, the top funds they invest in for this ISA are Baillie Gifford American, Baillie Gifford Managed, Fundsmith Equity and the HSBC FTSE 250 Index.

With Hargreaves Lansdown you can opt for a ready-made LISA or choose your own funds to invest in. With the latter, the return on investment will obviously depend upon your own decisions. 

How Do You Get Started?

Hargreaves Lansdown make it quick and simple to set up your Lifetime ISA online*.

This can be done with a minimum lump sum of £100 or a monthly payment of £25 or more. 

To open the account you’ll need to have a debit card and your National Insurance number available. You can then set up a new account, add funds or transfer in an ISA from elsewhere.

When it comes to choosing what to invest in, there are thousands of options to choose from. You might need to do some research, or you could opt for their most popular ready made ISA options. 

Conclusion

There is no doubt that a Lifetime ISA a terrific product. If you qualify for one, then the big 25% government bonus makes it something that you should definitely consider doing. Even putting away just £25 will see you build some good savings over time.

While a cash LISA is suitable for those who are risk averse, the Hargreaves Lansdown Lifetime ISA offers the possibility of greater returns via stock market investment. You don’t need to be a financial expert to open an account, as they have some ready-made options available. If you feel fairly confident about making your own decisions, though, then perhaps the DIY route may interest you more.

‘Capital at risk. Investments can go up and down in value, and you may not get back what you put in. This blog does not constitute financial advice. If you’re unsure, seek independent financial advice.’