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Hargreaves Lansdown: you could be £24,000 better off with a Lifetime ISA

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Savers who utilise bonuses from stocks and shares Lifetime ISAs (LISA) stand to make an extra £23,767 versus a savings account over 10 years, according to Hargreaves Lansdown.

The investment platform has calculated the potential benefits for Lifetime ISA investors, who are able to make the most of the government’s 25% annual bonus on contributions made (which can total £4,000 each year).

They found that savers who contributed £4,000 a year to a stocks and shares LISA stand to make a total of £66,034 over a 10-year period, inclusive of bonuses. This compares to £42,267 for investors who simply opened up a savings account.

In addition, Hargreaves Lansdown calculated that savers who opened up a cash LISA were likely to be £10,567 better off over a 10-year period, earning £52,834. This was only £8 off what could be earned on a general investment account – and involves taking much less risk.

The LISA is available for those aged between 18 and 39. Savers are able to use the proceeds from the tax-efficient scheme to either buy a first home or to contribute towards retirement.

Since the LISA was launched in April 2017, Hargreaves Lansdown’s customers have opened 50,000 accounts and the investment platform says it has so far paid out £50m of LISA bonuses.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, noted that LISAs are already making a huge difference to people who are saving for their first home.

“With the £4,000 annual allowance, the government offers up to £1,000 of free money each year. And there’s every sign that savers are making the most of their allowances: government figures show that in the first year, the average LISA held £3,114, so the average bonus was £778.50,” she explained.

How much difference can the LISA bonus make?

In the table below, Hargreaves Lansdown outlines the potential benefits for those able to save £4,000 a year for 10 years, earning 1% a year on savings and 5% on investments.

Where your money goes Your deposit after 10 years
Savings account £42,267
Cash LISA £52,834
Investment £52,827
Stocks and shares LISA £66,034

Source: Hargreaves Lansdown