1. What is the Lifetime ISA?

The Lifetime ISA (Individual Savings Account) is a UK government-backed savings product designed to help people save for their first home or retirement. It includes a government bonus on contributions.

2. How Does the Calculator Work?

The calculator uses the Lifetime ISA formula:

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 growth on your principal investment plus the government bonus.

3. Importance of Lifetime ISA Calculation

Details: Calculating potential growth helps savers understand how their money can grow over time with compound interest and government bonuses, aiding in financial planning for major life goals.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is the current government bonus rate?
A: The UK government typically adds a 25% bonus on contributions up to £4,000 per year, but check current rates as they may change.

Q2: Who is eligible for a Lifetime ISA?
A: UK residents aged 18-39 can open a Lifetime ISA to save for their first home or retirement.

Q3: What are the withdrawal rules?
A: Funds can be withdrawn tax-free for a first home purchase (up to £450,000) or after age 60. Other withdrawals typically incur a 25% penalty.

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

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