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Open a Cash Lifetime ISA today and earn 4.30% AER (variable) interest on your savings. Over 5-years, that’s hundreds more in your pocket than with the closest market competitor.


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Cash Lifetime ISA vs Stocks and Shares Lifetime ISA

Anya Gair
Last Updated 10 April 2024

To save or invest? That’s the question. Turns out, making decisions for your first home starts waaayy before the house-hunting stage. It all begins with which account you’ll choose to build your deposit.  

In this guide

It’s a smart idea to open a Lifetime ISA if you’re saving for your first home because you can score up to £1,000 towards your home every year, thanks to a 25% bonus from the UK government. Plus, you’ve got a choice. You can save money in a Cash Lifetime ISA or invest with a Stocks & Shares Lifetime ISA.

But how do you decide? Let’s start with the basics.

What’s the difference between a Cash Lifetime ISA and a Stocks and Shares Lifetime ISA?

With a Cash Lifetime ISA, your money and the government bonus gains interest over time. While with a Stocks and Shares Lifetime ISA, your savings and the government bonus will be invested in the stock market.

To help you decide which one - a Cash Lifetime ISA or Stocks and Shares Lifetime ISA - is right for you, we’ve outlined the pros and cons of each option below.

Pros and cons of a Cash Lifetime ISA


Saving is a safer option than investing

You earn interest over time. It’s 4.3% (variable) per year (or in finance-speak, AER – annual equivalent rate) with us.


House prices could go up faster than it takes for you to build your deposit (but hopefully, with our help, that won’t be the case).

Pros and cons of a Stocks and Shares Lifetime ISA


If the value of your investment goes up, you could buy your home sooner.

Choose the level of control you want. Some providers let you pick where you want to invest, while others do the thinking for you.


If the value of your investment goes down, you could lose some (or all) of your money and it would take you longer to buy your home. Major buzzkill.

The government bonus and returns are reinvested so the value of these can also go down so you can lose some or all of this as well.

How do I choose between Cash and Stocks & Shares Lifetime ISA?

It can be hard to know whether to simply put your savings into a Cash Lifetime ISA or invest your money instead. To help you decide, ask yourself these two questions:

🕰️ When do I want to buy my home?

Typically, anything under 5 years is a short-term goal and if it’s over 5 years, it’s a longer-term one when it comes to saving for your first home. If you have a longer-term goal, you might be more likely to invest, because it gives you a better chance of getting a return (even though it’s not guaranteed), so a Stocks and Shares Lifetime ISA could be better.

If you have a shorter-term goal, you might be more likely to save, because you are less likely to be able to recover from a potential loss in investments, so a Cash Lifetime ISA might be the better option.

If you’re not sure when you want to buy your home, our app can help. Set your budget, tell us how much you can set aside each month (and how much you’ve already put away) and we’ll show you how long it could take to buy your first home.

💣 How much risk do I want to take?

As mentioned in the pros and cons, saving can be a risk if house prices go up faster than you can build your deposit and investing can be a risk if the value of your investments go down. But typically, investing is riskier than saving - you may get back less than you invested, but you could also see a better return.

Different investments also come with different risk levels — from low, to medium to high. On a scale of 1 to 7 (1 being lower risk with typically low returns and 7 being higher risk with typically high returns) the sustainable ESG fund that you invest in with a Tembo Stocks & Shares Lifetime ISA sits at 5.

Ps: As much as past performance shows you how well an investment could perform, it doesn’t mean it will always be that way. It could be less and it could be more (🤞).

Can you switch from a Cash Lifetime ISA to a Stocks and Shares Lifetime ISA?

Yes, you can transfer your savings from a Cash Lifetime ISA to a Stocks and Shares Lifetime ISA. Whatever you do, don’t just close your current LISA. When you close a LISA (or any other kind of ISA) and take your money out, you’ll remove it from the tax-free account it's sitting in. This means if you withdraw your savings out, they won’t be protected any more and you may have to pay tax on them. Plus, withdrawing funds from a Lifetime ISA for anything other than buying your first home or retirement could incur a hefty 25% withdrawal charge.

Instead of just taking your funds out of your current LISA, you need to ask your new provider to transfer your funds to your new account. You normally have to provide your old LISA provider’s details and you may need your old account details to hand too.

Transfer your LISA to Tembo today

Voted the UK’s Best Lifetime ISA, we’re experts in making home happen, faster. Simply download the app and tell us about your current provider, and we’ll take care of the rest.

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Can you have both a Cash LISA and a Stocks and Shares LISA?

Yes! You can have both a Cash LISA and a Stocks and Shares LISA. However, you can only open and pay into one Lifetime ISA each tax year, up to £4,000. So you could have both types of LISAs and alternate which one you pay into each tax year. That way, you could use one LISA for saving for your first home in the short-term, and the other for long-term saving for your retirement. Or you could have both types to reduce the risk of getting back less than you put in - if the value of your investments goes down, your savings in your Cash Lifetime ISA won’t be affected.

Are there any penalties or fees for withdrawing funds from a Lifetime ISA?

Withdrawing funds from a Lifetime ISA for any purpose other than buying a first home or retirement before the age of 60 will incur a penalty. You’ll have to forfeit your government bonus and also have to pay an additional 25% withdrawal charge. If you purchase a home above the £450,000 threshold, you will also be hit by the withdrawal penalty as this classifies as an ‘ineligible’ purchase.

Why open a Lifetime ISA with Tembo?

With a Tembo Lifetime ISA, you get so much more than a government-boosted savings or investment account.

You get:

  • An interactive countdown that shows you when you could buy your home.
  • Personalised tips and tricks to help you put more money aside.
  • Money-saving challenges that could help you buy sooner.
  • Monthly cash giveaways
  • Gift Links to share with family and friends so they can contribute to your pot on birthdays, Christmas and other special occasions
  • ‘Team Up’ — our feature where you and your partner (or best friend/family member) can collab on the deposit for your first home together. When you both open a Tembo Lifetime ISA, you could get up to £2,000 towards your home every tax year.
  • Features based on behavioural science that help your brain build better money habits.
  • A place to keep track of spending.
  • Automatic payments to build your deposit in your sleep
  • Exclusive in-app content about money, mortgages and the home-buying process.
  • + access to all our exciting, upcoming features!

Start your journey to homeownership

Open a Lifetime ISA with Tembo today on our award-winning app and join the +350,000 others saving for their first home.

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