3 ethical Lifetime ISAs (LISAs)

Written by Lori Campbell on 25th Mar 2024

First-time buyers missed out on millions of pounds in free cash last year by not depositing their savings into a Lifetime ISA.

A Lifetime ISA, or LISA, is designed to help younger people save towards a first home or retirement. For every £1 you put in, the government adds a 25 per cent bonus – this could add up to £1,000 of ‘free money’ a year if you max out your contributions.

But new analysis of government data by the savings and investing app Moneybox reveals that potentially thousands of first-time buyers could have benefitted last year if they had utilised a LISA. Only 56,100 people bought their first home using a Lifetime ISA in 2022/2023.

It means out of 300,000 recorded first-time buyers purchasing a home in this period, up to 243,900 could have missed the government bonus offered by saving into a LISA. This equates to a potential £243,900,000 of “free money” lost in government LISA bonuses in 2022/2023, according to Moneybox.

Saving a first home deposit now takes on average of ten years, according to Generation Rent.

However, for anyone saving with a LISA and who is able to save the full £4,000 each tax year during that period, aspiring first-time buyers could save £40,000 and also gain a boost of £10,000 from the government.

Here we look at what a LISA is for, the plus points and pitfalls (these are important to consider), and the most ethical options.

Who is a LISA for?

To open a LISA, you must be aged between 18 and 39. You can pay into it until you turn 50. If you were to open the account at 18 and pay in the full £4,000 every year, you could earn as much as £32,000 of free money by the age of 50.

The money can be withdrawn for two purposes only: to use towards a deposit for a first home (which must cost under £450,000), or towards retirement (after the age of 60). Beware that if you take money out for any other reason, you will be charged a 25 per cent penalty fee. This can be a real trap in situations such as the cost of living crisis, where people’s finances have become tighter than they may have predicted. In the 2022-23 tax year, withdrawal charges for LISAs rose 53 per cent.

You can choose between a Cash LISA or a Stocks and Shares LISA. So which one is for you?

Cash LISAs are low risk, but low return (ie. the interest rate won’t beat inflation), and might suit you if you’re aiming to buy a first home in the near future. Stocks and Shares LISAs are more risky but also have the potential for higher returns. They might be a better choice if you’re looking to buy in five or more years.

The interest earned on your LISA savings or investment returns are totally tax-free. Just remember that the money you save into your LISA counts towards your annual ISA allowance of £20,000.

Ethical LISAs

If you are keen to help the planet as well as your future self, the good news is that there are responsible investment options for your Stocks and Shares LISA. Here are three good ones:


Minimum investment: £1
Fees: Monthly subscription fee of £1 (free for three months). For Stocks and Shares ISAs, there is a platform fee of 0.45 per cent. Annual fund provider fees range from 0.12 to 0.30 per cent.

Moneybox, an app that helps you to save or invest your spare change, offers both Cash and Stocks and Shares LISAs. Its Cash LISA has an interest rate of 4.40 per cent AER (variable). This includes a 3.50 per cent base rate (variable) and a fixed one year bonus interest rate of 0.90 per cent.

For the Stocks and Shares LISA, Moneybox has put together three simple ‘Starting Options’ according to risk and potential return: Cautious, Balanced and Adventurous. Each option includes a global shares fund, and you can opt for this to be ‘Socially Responsible.’ This means it invests in global companies that have been scored based on their commitment to environmental, social and governance (ESG) practices. If you are a more confident investor, you can build your own investment portfolio on Moneybox according to your values.

Bear in mind that Moneybox invests in tracker funds and ETF (Exchange Traded Funds) to keep costs low. These are passive investments that track an index and therefore might not be as positively impactful as actively-managed funds.

Moneybox has a useful “Housemates” feature, which enables you to track your savings progress alongside your buying partner’s.


AJ Bell

Minimum investment – £25 
Fees: 0.25 per cent annual shares/funds custody charge to a maximum of £3.50 a month (more info here). 

AJ Bell offers a huge range of investments including shares, funds, investment trusts, ETFs, bonds and gilts to help you build your Stocks and Shares LISA portfolio. Its Responsible Growth Fund takes into account environmental, social and governance (ESG) factors and screens out companies connected to industries that harm the planet and society.

The fund is made up largely of ETFs, which means that the money goes into a basket of companies and essentially, the asset manager sits back and keeps watch. While this style of investing is cheaper than a more active approach, it is not necessarily as positively impactful.

If you are keen to pick your own investments for your portfolio, AJ Bell’s large range of funds includes a good selection of actively-managed sustainable options. It’s ‘Favourite Fund’ list, which is hand-picked by experts as being most likely to bring you a long-term growth, includes the Liontrust Sustainable Future Global Growth, Liontrust Sustainable Future UK Growth, and Royal London Sustainable Leaders.

AJ Bell’s app-only platform Dodl also offers two themed responsible investments for a LISA at a lower cost (the pay-off for this is that they are passive tracker funds): A Greener World and The Good Guys.


Hargreaves Lansdown

Minimum investment: £25 per month
Fees: Annual management fee of 0.25 per cent on funds up to £1 million, 0.10 per cent up to £2 million, zero after that. For shares there is a 0.25 per cent charge capped at £45 per year. 

Hargreaves Lansdown (HL) is by far the UK’s biggest DIY investment platform, looking after more than £134 billion on behalf of around 1.8 million clients. Founded in 1981, it is now a FTSE100 company.

The platform offers an enormous number of investment options including around 3,700 funds, shares listed on the Canadian, European and UK stock exchanges, Exchange Traded Funds (ETFs), Investment Trusts and Corporate and Government bonds.

Encouragingly, it has a growing range of responsible investing options on offer. The one HL gives for your Stocks and Shares LISA is the Legal & General Future World ESG Developed Index fund. This is an index tracker fund that won’t invest in tobacco companies, pure coal producers, makers of controversial weapons or persistent violators of the UN Global Compact Principles.

Risk warning: With investment, your capital is at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.

Other ethical options for a Cash Lifetime ISA include Skipton Building Society, Newcastle Building Society, and Bath Building Society. 

Good With Money occasionally uses affiliate links to providers or offers, where relevant. This means that if you open an account or buy a service after following the link, Good With Money is paid a small referral fee. We choose our affiliates carefully and in line with the overall mission of the site.


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