Lifetime ISAs explained

Our Lifetime ISA is an Individual Savings Account that gives you a 25% Government bonus on payments into the account each month, up to a maximum balance of £4,000 annually and you don’t pay tax on your interest.

The Lifetime ISA is only suitable for savers planning to buy their first home or who are saving for later life as there are penalties for withdrawing it for any other reason, unless you’re diagnosed with a terminal illness. It is a Government initiative to support first time buyers on to the property ladder and also to help you save towards your retirement.

Before applying for a Lifetime ISA please read the key features document and key product information including terms and conditions for our online account and in-branch account.

Below we aim to answer all the burning questions you might have about Lifetime ISAs.

What is a Lifetime ISA?

A Lifetime ISA is a type of ISA (an Individual Savings Account) for first-time buyers or those looking to save for later life. A maximum of £4,000 can be deposited each tax year, and the Government will award a bonus of 25% annually (up to a limit of £1,000 each year).


Am I eligible for a Lifetime ISA?

To qualify for a Lifetime ISA, you must be a UK resident aged 18 to 39. However, once your ISA has been opened you can continue to add money until your 50th birthday.


Is a Lifetime ISA right for me?

If you're thinking about saving up for your very first home, a Lifetime ISA can give you a helping hand.

A Lifetime ISA is certainly worth considering if:

  • You're saving for your first house, but have no plans to buy in the next 12 months
  • You'd like to boost your retirement fund and save for post-60 life



What exactly is a first-time buyer?

A first-time buyer is someone who has never owned a property before, including a home outside of the UK. If you've inherited a property, or owned a share of one, you will not be classed as a first-time buyer.


What if I need access to the money in my Lifetime ISA?

If easy access to your savings is important, a Lifetime ISA will not be suitable for you. Any withdrawals made from your Lifetime ISA between now and Monday 5th April 2021 will incur a 20% Government withdrawal charge. After Monday 5th April 2021 you'll be charged 25% to withdraw money for reasons other than buying your first home, unless you're aged 60 or over which means you could get back less than you paid in.

To put things into context, withdrawing £2,000 up to 5th April 2021 will incur a penalty of £400. A £2,000 withdrawal after 5th April 2021 will incur a £500 penalty. You may get back less than you put in if you request an ineligible withdrawal.


What other options are available if I discover a Lifetime ISA isn't for me?

If you need the option to withdraw your money regularly, you should consider one of our easy access or short-term savings accounts instead.


Can you tell me more about a Lifetime ISA?

We recommend reading our key features document and key product information including terms and conditions for our online account and in-branch account before applying. You can continue to read the answers to our Lifetime ISA FAQs below too, or get in touch with a member of our team - they'll be happy to help.


Can I have multiple Lifetime ISAs?

Yes, you can have multiple Lifetime ISAs. However, you can only pay into one account during the same financial year (April 6th - April 5th).


I already have a Cash ISA - Can I apply for a Lifetime ISA?

Yes, you can. Even if you have a Cash ISA, you can apply for a Lifetime ISA. Combined, however, you cannot deposit more than £20,000 into your various ISA accounts per tax year (this is called your annual ISA allowance).


Means test and capital test risk

When you place money into a Lifetime ISA, it's treated in the same way as money deposited into any other ISA account. This means when it comes to means-tested benefits, your Lifetime ISA savings will be taken into consideration and you may not qualify for certain benefits.

Your Lifetime ISA will also be classed as an asset and may be taken during the debt recovery process.


How do I apply for a Lifetime ISA?

Applying for a Lifetime ISA with us is simple, just give your local branch a call and we'll arrange an appointment. Bring your ID, National Insurance number and an initial cash deposit (£10 minimum).


Can I apply for a Lifetime ISA online?

Yes, you can apply online. You'll need your NI number, an email address and mobile phone number, proof of address for the last 6 months and your nominated bank account details.


Can I transfer my existing Lifetime ISA to The Nottingham?

We can only accept Lifetime ISA transfers into new Nottingham Building Society Lifetime ISAs, if you already have a Lifetime ISA with us, we are unable to accept your Lifetime ISA transfer in request. You must be aged between 18-39 years old prior to completing your Lifetime ISA transfer in request to us. Lifetime ISA transfers in are only permitted for our online Lifetime ISAs only, you cannot complete a Lifetime ISA transfer in request via our branches.

We only accept transfers in from a single Lifetime ISA provider (multiple Lifetime ISA transfers in are not permitted). When transferring your Lifetime ISA to us, we only accept all of your Lifetime ISA funds from your existing Lifetime ISA provider, partial transfers are not permitted.


How long will it take to transfer my Lifetime ISA from my existing provider to The Nottingham?

Your current Lifetime provider is obliged, under HMRC (HM Revenue and Customs) guidelines, to complete the transfer within 30 days of receiving the request. There’s no need to tell your current Lifetime ISA provider that you are moving your money, we’ll do that for you and arrange the transfer. You will start to earn interest on the amount you transfer from the date on the transfer cheque from your current Lifetime ISA provider.

Please do not pay in any further funds into your Lifetime ISA with us until we have confirmed receipt of your Lifetime ISA funds from your existing Lifetime ISA provider.


How much can I save with a Lifetime ISA?

With a Lifetime ISA, you can deposit up to £4,000 every tax year into your account. The Government will then pay you an annual bonus of 25% (capped at £1,000 per year).


What is the interest rate for the Lifetime ISA?

On top of the 25% bonus you'll receive from the Government, your Lifetime ISA has an annual tax-free interest rate of 1.05%. This will be paid to you every year on 5th April.


What happens if I change my mind?

You can close your Lifetime ISA within 30 days of opening it without incurring a withdrawal fee. Just get in touch and we'll guide you through the next steps. This period does not apply if you are transferring your Lifetime ISA to us from your existing Lifetime ISA provider.


What happens if I become ill?

If you fall ill, please speak to an adviser. In cases of terminal illness, where the account owner has less than 12 months to live, withdrawals can be made without incurring a fee.


When can I withdraw money from my Lifetime ISA?

You can withdraw money penalty-free, under the following circumstances:

  • When you're ready to buy your first home (as long as your account has been active for 12 months. If you are transferring your Lifetime ISA to us this is the date you first funded your Lifetime ISA with your existing provider)
  • When you reach 60 years old 
  • If you are diagnosed with a terminal illness and have less than a year to live In the event of your death.



Will I incur a withdrawal fee?

If you're under 60 and need to withdraw money from your Lifetime ISA for reasons other than buying a property, withdrawals made before Monday 5th April 2021 will incur a 20% Government withdrawal charge. After Monday 5th April 2021 any withdrawals will incur a 25% Government withdrawal charge.


How do I buy my first home with a Lifetime ISA?

Once your Lifetime ISA has been open for 12 months, you can withdraw money from it to buy your first home, worth up to £450,000.


Can my partner and I buy a home using both of our individual Lifetime ISAs?

Yes, you can. Both you and your partner can use your own Lifetime ISAs to purchase your first home together, as long as you're both first-time buyers and the property is valued below £450,000. You'll both receive the 25% bonus from the Government too as you save separately.


Can I have a joint Lifetime ISA?

There's no such thing as a joint Lifetime ISA. Instead, if both you and your partner are eligible, you can open two separate Lifetime ISAs – the details of this are explained above.


What happens if my house purchase falls through?

Don't worry, if things don't go according to plan with your house purchase your Lifetime ISA can be re-opened and the money saved will be replaced.



Retirement and later life

Is a Lifetime ISA a good way to save for retirement?

A Lifetime ISA is an option people consider for their retirement savings, but it may not be the best choice. It all depends on your individual situation, and we recommend speaking to a financial adviser to discover the most beneficial route for you.


What if I want to retire later?

This won't affect your Lifetime ISA. It simply means you'll have access to the money from aged 60, which may be before you choose to retire.


What happens with I die?

The money in your Lifetime ISA, including all interest and bonuses, will be passed on to beneficiaries when you die.


Which provider should I choose to open my Lifetime ISA with?

There are a number of providers in the UK offering Lifetime ISAs but we're the only one to provide a face-to-face, in-branch service as well as online applications. Our customer satisfaction score speaks for itself, and we offer perks like a Members Rewards programme too. There's ample reason to choose a Lifetime ISA with The Nottingham, get in touch to discuss your options with our friendly team today.

If you have any further questions, the Government has created a wealth of content around the Lifetime ISA product – simply visit lifetimeisa.campaign.gov.uk. Alternatively find your nearest Nottingham Building Society branch and pay them a visit.

You can view the Lifetime ISA product here.

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Your savings are protected

Your eligible deposits with Nottingham Building Society are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit protection scheme.

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We have a range of accounts we're sure will meet your savings needs, from ISAs to children's savers, fixed rates to easy access, regular savers to limited access bonds. We even have a Lifetime ISA for those savings towards their first home or retirement

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Fee free mortgage advice for Lifetime ISA savers

Once you've saved enough in your Lifetime ISA to buy your first home, you'll have access to fee free mortgage advice from Nottingham Mortgage Services, a service which normally costs £299. Brokers at Nottingham Mortgage Services will search thousands of mortgages from over 60 lenders, such as NatWest, Nationwide Building Society, Barclays, TSB and many more, to find the right mortgage for you. They don’t just look at the headline rates, they’ll weigh up your financial circumstances and look at all the mortgage features and hidden costs. You'll be provided a dedicated broker who will work with you every step of the way to make the mortgage process simple.