Nutty

Our review of Lightyear’s new ISAs

Edward Savage
Edward Savage
Personal Finance Editor
Published
January 21, 2025 16:26
Updated
January 24, 2025 10:31

Lightyear, the slick, low-cost investment platform, that has been rocketing through the UK and Europe, since its launch back in 2020, has officially launched two ISAs for UK customers to save and invest tax-free – a Stocks & Shares ISA and a Cash ISA.

Our review of Lightyear’s new ISAs

This is awesome news for us Brits, as the majority of us save and invest within an ISA (or should be), so this opens up Lightyear¹ as a potential new option not only for an investment platform but also as a home for our hard-earned savings.

Lightyear’s ISAs

With that in mind, let's run through both ISAs and see what they’re all about, and whether they’re right for you.

Before we jump into that, here’s a quick overview of an ISA if you’re not too familiar… You can add up to £20,000 per tax year (April 6th to April 5th the following year), and everything you make, such as interest, or profits from your investments, is tax-free (free from UK tax). That means you could make much more over time. There’s also no tax paperwork to worry about either.

Stocks & Shares ISA

Cash ISA

Listen to this! The interest rate you’ll get in Lightyear’s Cash ISA is the same as the Bank of England base rate. Yep, that means you’ll effectively get the best interest rate possible on your savings, which at the time of writing is 4.75% (23rd January 2025). 

That’s a huge amount – believe it or not, but there’s £3.4 billion in interest across the UK that’s not passed on in cash ISAs (Lightyear’s analysis of Bank of England and HMRC data). This is due to the difference between the base rate that the Bank of England pays banks (4.75%), and the average interest rate that’s actually paid out: 3.6%.

Worse still, if you dive specifically into variable rate cash ISAs (vs those that opt for a fixed rate ISA), the interest rate passed on is just 1.8%. This number has been rapidly declining, and is the lowest rate in 2 years. It results in a massive £481 missed in interest per person each year. So it pays to switch to Lightyear’s Cash ISA, and it’s easy too).

What we really like is that everyone gets this top rate, there’s no gimmicks such as ’just for new customers’, or having to deposit a lot of cash, or a ‘bonus’ rate for 12 months, or reduces after a certain amount of withdrawals (all these things exist with other providers). It’s simple, everyone gets the Bank of England base rate.

There are no fees for the Cash ISA either, so you get what you see. And from what we can see, this puts Lightyear’s Cash ISA up there as one of the best – and with the added benefit that the interest rates moves with the Bank of England base rate, so you don’t need to keep shopping around for the top rate, you can trust that you’ll always be getting one of the best savings rates available.

The ISA is also ‘flexible’, which means you can withdraw money and then re-add it during the same tax-year, and it won’t count as adding new money in relation to your annual ISA allowance of £20,000. 

ISA allowance

You can also transfer an existing ISA to Lightyear if you want to, which is free, and will take a few weeks, depending on your existing provider (company).

Oh yeah, and the Lightyear app, across mobile and web, is pretty incredible too, and super easy to use.

Overall, we’re not seeing any downsides – just some out of this world interest on your cash, all tax-free.

Note: Cash ISA money is held in UK banks and qualifying money market funds (QMMFs).

If that sounds interesting, here’s where to get started with Lightyear’s Cash ISA¹.

Stocks and Shares ISA

With the Stocks and Shares ISA, you’ll get all the same low fees, investment options and features as their standard account (called a General Investment Account (GIA)), with the added bonus that everything you make will be tax-free.

Stocks and Shares

Let's run through the details.

Note: this ISA is also flexible, so you can withdraw money and re-add it within the same tax year and it won’t affect your £20,000 annual ISA allowance.

Fees

First up, the fees. You won’t pay anything just to have an account and hold investments (i.e. no account fees), which is ideal for all investors, particularly long-term investors. On other platforms there can be a fee (either a monthly subscription, or a fee based on the percentage of your investments (e.g. 0.25% per year)).

The main fee you do actually pay with Lightyear is a trading fee, which is a fee to buy and sell stocks and shares, which is either £1 (UK stocks) ,€1 (EU stocks) or 0.1% up to $1 (US stocks, min $0.01), per order. This is very low, and fees with other platforms can range from zero to £11.95 depending on the platform and the investment.

If you’re wondering how Lightyear’s Stocks & Shares ISA compares with other providers, an  independent macroeconomic research firm (Capital Economics) has validated that Lightyear’s ISA is 10 times cheaper than the market average over 10 years.

Investing in ETFs (exchange-traded funds) is free (no trading fees).

ETFs (exchange-traded funds)

If you make investments in another currency, such as buying US stocks in US Dollars, there will be a currency conversion fee to exchange your Pounds for US Dollars, which is low at 0.35%. The exchange rate is also the ‘real’ rate (interbank rate), so no hidden fees in the exchange rate either.

Currency conversion fee

This is a very good conversion fee, with other platforms, this can range from 0.15% to 1.5%, depending on the platform.

Investment range

With Lightyear, you can invest in individual stocks and shares (e.g. companies like Apple and Amazon) and ETFs (exchange-traded funds), which are groups of lots of different investments (e.g. the top 100 companies in the UK, called the FTSE 100, or the top 500 in the US, called the S&P 500).

There’s over 3,500 stocks, shares and ETFs in total, which is a decent range, and new ones are added regularly (and also by request), and they include companies and investments from across the world.

For saving cash (separate to the Cash ISA), you can also invest in a money market fund, which pays a very high interest rate. In fact, there’s a separate service with Lightyear called ‘Vaults’ to save cash within your Lightyear Stocks and Shares ISA (more below).

If that sounds interesting, here’s where to get started with Lightyear’s Stocks & Shares ISA¹ (Capital at risk).

Multi-currency accounts

Remember that foreign exchange fee? Well even though it’s low at 0.35%, if you are investing within Lightyear’s General Investment Account (GIA), and investing in foreign stocks in another currency, you could actually avoid paying it on every order, as Lightyear offers the ability to hold multiple currencies within your Lightyear GIA – so you can use the relevant currency to buy your investment instead of converting Pounds.

Note: you’ll still pay the fee once to convert your money within your Lightyear account, unless you deposit the relevant currency. And you can’t currently do this within any Stocks & Shares ISA.

You can hold Pounds (GBP), Euros (EUR) and US Dollars (USD). You’ll also earn interest on your uninvested cash.

Vaults

Vaults provide an interest-earning option with your General Investment Account or within your Lightyear Stocks & Shares ISA, and separate to their new Cash ISA. Your money within a Vault is invested into a money market fund, which is an investment fund that holds cash and things effectively the same as cash, which provides interest. 

The interest rates on these are typically very high, and close to the Bank of England base rate.

Money market fund (MMF)

So, if you had some spare cash, you could either use a Vault, or open and save into a Cash ISA, depending on your preference and risk tolerance.

You’ll also earn interest on your uninvested cash in your Stocks and Shares ISA without having to move it into a Vault, although the interest rate will be lower – currently 3% for GBP.

Investing tools

Within the app itself, you also get access to a range of great tools and features to help you make smarter investments and to manage your trading strategies. For instance, you can set prices to buy and sell investments at, there’s analyst ratings and projections to give you expert opinions, and information on the company and stock such as their earnings per share, dividend calendar, and articles and news about the company (plus many more features).

Lightyear app

By the way, the app is very cool. It’s super easy to use, and really slick. Quite possibly the best investment app out there currently.

Investor protection

Lightyear is authorised and regulated by the Financial Conduct Authority (FCA).

Financial Conduct Authority (FCA)

Lightyear (Lightyear U.K Ltd) is also protected by the Financial Services Compensation Scheme (FSCS), which provides compensation up to £85,000 should Lightyear go out of business and be unable to return any of your cash. 

Financial Services Compensation Scheme (FSCS)

Our thoughts

Overall, the launch of both the Cash ISA and Stocks & Shares ISA is great news for the UK. They’re both going straight to the top as the best options for our readers, with a very high interest rate with their Cash ISA, and being able to use Lightyear’s investment platform tax-free with their Stocks and Shares ISA.

Their fees are very low, the app is great and packed with useful features, and there’s a wide range of investment options. And now you can invest tax-free, Lightyear’s popularity might go to infinity and beyond!

To learn more, or get started with Lightyear, head over to the Lightyear website¹. 

Remember, when you invest your capital is at risk, and ISA rules apply.

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