A Lifetime ISA is designed for first-time buyers or retirement savings and comes with a free 25% bonus on any contributions each tax year, up to £1,000. This makes it a great way to save your first house fund or save for later life.
But if you withdraw the money from a LISA for any other purpose except your first home purchase or retirement, you’ll be charged a 25% withdrawal penalty from the government.
So if there’s a chance you will need your money for something else, you could consider a Fixed Rate Cash ISA as an alternative. While it doesn’t come with a free 25% bonus, with a Fixed Rate Cash ISA you will benefit from a fixed rate for a set time period - normally 1-3 years.
With the Tembo Fixed Rate Cash ISA you can lock in a 4.27% AER (fixed) rate for 12 months. You can also add more money later on! New funds will instantly lock in for 12 months from the date they're added, at the rate available at the time.
Just remember that if you withdraw money from your Fixed Rate Cash ISA before the 12-month term has ended, this will result in a 90-day interest penalty on the amount withdrawn. This may mean you get back less than you originally deposited.
Please note, across all your ISA accounts, you can only save up to £20,000 each tax year, which includes all the accounts you have with different providers.
Tax treatment depends on individual circumstances and may be subject to change in the future. Must be 18-39 to open a LISA. Ineligible withdrawals may return less than paid in.