Saving a deposit to buy a home is taking longer than ever. Luckily, the government has stepped in to help in the form of a Lifetime ISA (LISA) which offers a 25% annual tax-free bonus for savers. We've asked Tembo - who have just launched their own market leading LISA - to tell us how these products work and what’s special about theirs.
For many first-time buyers in the UK, the journey to homeownership can feel like an endless, uphill battle. However, the Lifetime ISA (aka LISA) can make turning this dream into a reality a little easier.
What is a Lifetime ISA?
A Lifetime ISA is a government-backed savings product, designed to boost the house funds of aspiring homeowners who are on their path to purchasing their first home. Note that they can also be used to save for retirement, but we’ll focus on the homebuying aspect for now.
They were introduced back in 2017 as a new way to help people to save for their first home, with the help of an annual 25% government bonus.
Since then, a number of providers (including Tembo) have begun to offer Lifetime ISAs. So, if you’re thinking about opening one, or you have a LISA already but want to be sure you’re getting the best deal, read on…
How does a Lifetime ISA work?
In short, you can save up to £4,000 tax-free each year into a LISA, and you’ll get a 25% bonus on top from the government. That means for every £4 you save in a tax year, the government will give you £1.
There are two types of Lifetime ISA available – a Cash Lifetime ISA, or a Stocks and Shares Lifetime ISA.
A Cash Lifetime ISA works like a regular savings account – you save money in cash, and get an interest rate on your savings. The interest rate is set by your provider, and changes over time in response to the Bank of England base rate, or other factors.
With a Stocks and Shares Lifetime ISA you invest your money into a fund which in turn invests in the stock market. You could see a greater return in the longer term with a Stocks & Shares LISA, but this isn’t guaranteed, and your investments could go up as well as down.
For simplicity, in this article we’re going to focus on the Cash Lifetime ISA product.
Key Features of a Cash Lifetime ISA
- 25% government bonus: The main feature of a Cash Lifetime ISA is the generous government bonus it offers. For every £4 you save, the government will contribute an additional £1, up to a maximum of £1,000 per tax year. By comparison, the average stock market return is around 10%.*
- Tax-free growth: Just like other ISAs, the money held within a Cash Lifetime ISA grows tax-free. This means that any interest earned is yours to keep, without having to worry about paying tax on your gains.
- For first-time buyers: A Cash Lifetime ISA can be opened by UK residents between the ages of 18-39 years old, and can be paid into up until you’re 50 years old. Some eligibility rules do apply – your first home will need to cost less than £450,000, be in the UK, for you to live in (aka not buy-to-let), bought after a minimum of 12 months of saving, and bought with the help of a mortgage.
- Earn interest: As well as the 25% bonus, you also earn interest on top of your savings with a Cash Lifetime ISA. Watch out for introductory rates Some providers will offer a higher rate for year #1, which then drops off a cliff – leaving you worse off if you stay loyal.
Introducing Tembo’s Cash Lifetime ISA
In February 2024, Tembo launched their market-leading Cash Lifetime ISA offering, specifically designed to help first-time buyers achieve their homeownership goal sooner.
What makes Tembo’s Cash Lifetime ISA different?
- Market-leading offering: Tembo understands that maximising every penny of your savings is crucial when working towards a deposit for your first home. Their Cash Lifetime ISA will earn you 4.3% AER (variable), and because saving for a home often takes more than 12 months, the rates don’t change after year #1 either. Over 5-years, that adds up to a difference of more than £600 extra in interest versus the closest market competitor. *
- No fees: With Tembo’s Cash Lifetime ISA, you won’t be charged a monthly fee for the service.
- Award-winning app: The Tembo app has been designed to help reduce your time to buy. Savvy features include everything from Team Up, which allows two people to save and track their deposit journey together to a gift link you can send to family & friends who want to help.
- Monthly giveaways: Each month, Tembo gives away £1,000 (that’s £1,250 with the bonus!) to a lucky saver. You’ll receive free entries to the draw just by signing up!
- Fast transfers: If you are already with another Lifetime ISA provider, you can transfer your balance to Tembo in less than 5-minutes. We’ll take care of the rest, and in just 2-6 weeks, we’ll have your money transferred across.
- UK-based support: At Tembo, we pride ourselves on delivering exceptional customer service. Whether you have questions about your account or want more information about how Lifetime ISAs work, our dedicated UK-based customers support team is here to help every step of the way.
- Protected: Your money is held in a bank-level security account, and is protected by the Financial Services Compensation Scheme. This provides protection of up to £85,000 if the bank that holds your money went out of business. At Tembo, funds are held with our partner banks Barclays and Virgin Money.
How to Open a Lifetime ISA
Ready to take the first step towards homeownership with Tembo’s Cash Lifetime ISA? Getting started is quick and easy – in fact, opening an account or transferring an existing Lifetime ISA only takes 5 minutes and can all be done digitally. Simply follow this link to get started.
Notes
*NerdWallet data based on S&P 500 returns.
Market-leading is based on the current available Cash Lifetime ISA providers as of 19th February 2024, excluding introductory offers. A saver would generate an additional £614 in interest over a 5-year period of maxing out their Cash Lifetime ISA with Tembo versus the next closest provider. Rates are accurate as of 19th February 2024, but may be subject to change.
Tembo Lifetime ISA: The 25% bonus and tax-free benefits of these accounts depend on government policy, tax rules and your eligibility to subscribe, which can change. Withdrawal other than for an eligible house purchase or retirement will result in a 25% withdrawal penalty from the UK government which means you may get back less than you put in.A Lifetime ISA can also be used for retirement from age 60. Please check you’re not losing out on other pension benefits from your employer.
Tembo investing product (Tembo Stocks & Shares Lifetime ISA): If you open a Tembo Stocks & Shares Lifetime ISA, it’s important that you know the value of your investment could go up as well as down. You could get back less than you put in, which means it would take you longer to buy your first home. Past performance is not necessarily a guide to the future and investing is not intended to be a short-term option. We can’t and don’t provide financial advice so please be sure that investment risk is right for you.
Visit Tembo website for more information on the Tembo Lifetime ISA eligibility, Tembo Lifetime ISA Key Features, the Customer Agreement and our Privacy Policy.
Tembo, Tembo Lifetime ISA, Tembo LISA and Nude are trading names of Nude Finance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN: 928010) and registered as an account information services provider (FRN: 913654). We are a private limited company registered at 18 Crucifix Lane, London, SE1 3JW, with registration number 12008146. Nude is a registered trade mark of Nude Finance Limited (12008146) (TM Reg No UK00003263387).
April 25, 2024 
