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The 25% government bonus for Lifetime ISA (LISA) customers was an attractive hook, but what happens with your bonus could make a difference to your investments.

The government bonus for the first year of contributions to a LISA was paid as a one-off payment to customers at the end of April 2018.

However, in the future, the bonus will be paid by HMRC to customers on a monthly basis. Different providers have taken different approaches to the way the bonus is treated once it’s paid, and this could have an impact on the size of your LISA.

At Nutmeg, we’re already investing more than £7 million˙ in government bonuses for our LISA customers. We want to make sure our customers are always getting the most from their investments. That’s why we make sure your bonus is automatically invested in the same way as your contributions, rather than being held in cash.

This way, your contribution and the government bonus will benefit from the effect of compound returns. We want to make sure you are supported in reaching your goal, whether that’s saving for your first home or for retirement – or even if you haven’t quite decided yet.

For more on our LISA, take a look at our dedicated Lifetime isa page and FAQs.

˙represents the total amount of bonuses paid to our LISA customers by HMRC measured 01/05/2018

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest.

A Lifetime ISA may not be right for everyone

  • You must be 18–39 years old to open one.
  • If you need to withdraw the money before you’re 60, and it’s not for the purchase of a first home up to £450,000, or a terminal illness, you’ll pay a 25% government penalty (the withdrawal penalty will be temporarily reduced from 25% to 20% from 6 March 2020 till 5 April 2021 due to coronavirus). So you may get back less than you put in.
  • Compared to a pension, the Lifetime ISA is treated differently for tax purposes. You may be better off contributing to a pension.
  • If you choose to opt out of your workplace pension to pay into a Lifetime ISA, you may lose the benefits of the employer-matched contributions.

A Lifetime ISA may not be right for everyone and tax rules may change in the future. If you are unsure if a Lifetime ISA is the right choice for you, please seek independent financial advice.