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Stocks & Shares ISA vs Lifetime ISA

They say money doesn’t grow on trees, and they’re right. But it does grow elsewhere, like in your Child Trust Fund, which has finally reached maturity.

So, what now? Well you may want to spend some of it, but you could keep your money growing if you wanted, but how you do it and by how much depends on where you put it.

Meet the OneFamily ISA and LISA

ISA is short for Individual Savings Account, whereas LISA stands for Lifetime Individual Savings Account.

In simple terms, both are ways of saving money without paying tax on the income earned, which is very good. So, what are the differences between the OneFamily ISA and LISA?

Similarities first

You can start opening both when you’re 18. They both invest in stocks and shares, and both have a fund which takes more risk for higher potential growth and a lower risk fund for lower potential growth.

They also both have conditions dictating how you invest and withdraw your money.

Now, the differences

With ISA you can transfer in any amount of money from your Child Trust Fund and then invest up to the annual ISA subscription limit of £20,000.

LISA, on the other hand, only allows you to invest up to the current tax year payment limit of £4,000. And you can only take out LISAs until you’re 39.

Before you rush into ISA instead of LISA, LISA gets a 25% government top-up, calculated on the amount you pay in. Although to keep that top-up withdrawals from the LISA must go towards the purchase of your first UK home, or your retirement at the age of 60. Which we know seems a long way off right now, but it’s still worth considering.

Withdrawals for any other reason will be subject to a government charge of up to 25%.

With ISA on the other hand, you can access your money when you need it whatever that’s for, although our Stocks and Shares ISA is considered a medium to long-term investment too, with a better chance of performing well the longer you leave it.

Finally, the admin

Which is the same for both and it’s is very easy, because applying for and managing ISA and LISA can all be done online. You can start a OneFamily ISA or LISA by transferring your Child Trust Fund, with the option to contribute more if and when you like.

Although it’s worth remembering that investment could go down as well as up, so you could get back less than you put in.

So that’s the ISA and LISA in a nutshell. Good to know for your money to grow.