Lifetime ISA Calculator

Lifetime ISA Formula:

\[ A = P \times (1 + R / n)^{(n \times T)} + \text{Government Bonus} \]

Principal (P):

GBP

Annual Interest Rate (R):

decimal

Compounding Frequency (n):

per year

Time (T):

years

Government Bonus:

GBP

Final Amount (A):

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1. What is the Lifetime ISA Formula?

The Lifetime ISA (Individual Savings Account) formula calculates the final amount including compound interest and government bonus. It helps savers understand how their investments grow over time with the added government contribution.

2. How Does the Calculator Work?

The calculator uses the Lifetime ISA formula:

\[ A = P \times (1 + R / n)^{(n \times T)} + \text{Government Bonus} \]

Where:

\( P \) — Principal amount (GBP)
\( R \) — Annual interest rate (decimal)
\( n \) — Compounding frequency per year
\( T \) — Time in years
Government Bonus — Additional government contribution (GBP)

Explanation: The formula calculates compound interest on the principal amount and adds the government bonus to determine the final savings amount.

3. Importance of Lifetime ISA Calculation

Details: Understanding the growth potential of a Lifetime ISA helps individuals plan for major life expenses like buying a first home or saving for retirement, while maximizing government contributions.

4. Using the Calculator

Tips: Enter principal in GBP, annual interest rate as a decimal (e.g., 0.05 for 5%), compounding frequency per year, time in years, and government bonus in GBP. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the maximum government bonus for Lifetime ISAs?
A: The government adds a 25% bonus on contributions up to £4,000 per tax year, with a maximum bonus of £1,000 per year.

Q2: Who is eligible for a Lifetime ISA?
A: UK residents aged 18-39 can open a Lifetime ISA and contribute until age 50.

Q3: What can Lifetime ISA funds be used for?
A: Funds can be used for purchasing a first home (up to £450,000) or withdrawn at age 60 for retirement. Other withdrawals typically incur a 25% penalty.

Q4: How does compounding frequency affect returns?
A: More frequent compounding (e.g., monthly vs. annually) results in slightly higher returns due to interest being calculated on accumulated interest more often.

Q5: Are there contribution limits for Lifetime ISAs?
A: Yes, you can contribute up to £4,000 per tax year, which counts toward your overall £20,000 ISA allowance.