Both the Cash Lifetime ISA and Stocks & Shares Lifetime ISA give you a free 25% bonus on your contributions towards your first home or retirement, up to £1,000 per tax year.
You can put up to £4,000 per tax year into both types of Lifetime ISAs. The main difference between the two is with a Cash Lifetime ISA you'll earn interest on your balance - currently, Tembo offers 4.75% AER (variable) 👏
With a Stocks & Shares Lifetime ISA, instead of earning interest on your savings, your money is invested - if your investments do well, you'll get investment growth over time. At Tembo, use BlackRock's MyMap5 ESG fund, which will give you returns on your money - however as with all investments please keep in mind that your money can go up, as well as down in future.
If you want to buy a home in 5-years or less, a Cash Lifetime ISA might be a better option - this is because investing should be seen as a long-term practice. Investing over a longer period gives your investments more chance to ride out any short-term fluctuations in the stock market and give you a better chance of getting a return (even though it’s not guaranteed). This is why investing is riskier than saving, as you may get back less than you invested.
To use either the Cash Lifetime ISA or the Stocks & Shares Lifetime ISA you need to meet certain eligibility criteria:
You must be 18-39 years old to open either type of account, and make your first payment into your LISA before you’re 40.
You must have your Lifetime ISA open for at least 12 months before you can use it to buy your first home
To use a Lifetime ISA to fund retirement, you can only take out the funds at age 60 or older. If you take your funds out earlier, you'll incur the 25% withdrawal charge, meaning you may get back less than you paid in.
To use a Lifetime ISA to purchase your first home, the property you buy must be £450,000 or less, be in the UK, and be where you intend to live (i.e. you cannot use a LISA to purchase a property to rent out to others).