The new Lifetime ISA or LISA is going to be implemented soon, giving hefty rewards to those who are saving up either to buy a home or for their retirement. But with the launch of the LISA just a fortnight or so away, a lot of people are still unclear on the details and unsure about whether it is the right product for them.
About the LISA
The Lifetime ISA will be available for those aged between 18 and 40, though once you have opened one you can keep saving in it until the age if 50. They are aimed at those who are saving up either to buy their first home or for their retirement.
Savings of up to £4,000 per year placed in a LISA will receive a generous 25% bonus from the government, payable when the money is taken out either to put a deposit on a first home or to fund retirement at the end of the term. This far outstrips any interest rates on offer, giving up to £1,000 per year if the full £4,000 allowance is used. Any interest or investment growth will be applied over and above the government bonus on your deposits and, as with any ISA, will be tax-free.
Where can I Get a LISA?
While Lifetime ISAs have gotten a lot of attention and look set to be very much in demand, it seems they will be less widely available than other savings accounts. A lot of banks are declining to offer them, or at least have no current plans to do so. Santander, TSB, and Barclays all fall within this group. Others, such as HSBC and Lloyds, have indicated that they will make a decision on whether to offer LISAs once the final rules have been announced.
Of those who do offer LISAs, most of the offerings so far announced take the form of stocks and shares ISAs. The offerings from the Share Centre, Hargreaves Lansdown, and Nutmeg are all stocks and shares accounts. The only Cash ISA that has been announced as a LISA offering so far comes from Skipton Building Society, though more may follow as other providers announce their products.
Is a Lifetime ISA Right for Me?
That is a question only you can really answer, based on your own personal circumstances. Add the fact that the full and final details of LISA accounts have not yet been released, and any decision made at present should be somewhat provisional.
That said, Lifetime ISAs look very promising for those who are specifically saving up for their first property. The 25% bonus is a very attractive incentive to use these accounts, and outstrips any currently available interest rate several times over – and besides, it is added on top of interest. Whether using it as a pension alternative in order to save for retirement is similarly worthwhile is a much more uncertain question, requiring a much more individualised analysis of your alternative options.