Derin Clark

Derin Clark

Online Reporter
Published: 04/12/2019

While the Help to Buy ISAs are no longer available, those saving for a deposit for their first home can still benefit from a 25% Government bonus by saving into a Lifetime ISA (LISA). Here we take a look at what LISAs are and what rates are being offered.

What are LISAs

LISAs were launched in April 2017 and offer eligible savers the ability to save towards their first home while also benefiting from a 25% Government bonus. It should be noted that LISAs are very different products to Help to Buy ISAs and not only have more restrictions on who can open one, but also have higher withdrawal penalties. In addition to this, the money saved in a LISA can only receive the Government bonus if it is used as a deposit for a first home and/or for retirement.

Savers thinking about opening a LISA should be aware that they have to be aged between 18-39 in order to do so. They can continue saving into the LISA until the age of 50, but cannot access the money after this age until they reach 60. Unlike the Help to Buy ISAs, LISAs add the Government bonus each year, which means that as they allow a maximum deposit of £4,000 each tax year, this means that savers who save the maximum amount each year can get a yearly £1,000 bonus added to their savings.

For savers thinking about opening a LISA, Rachel Springall, financial expert at Moneyfacts.co.uk, said: “Those who missed out on opening a Help to Buy ISA will still find the Lifetime ISAs a good alternative. Lifetime ISAs will also apply the 25% Government bonus and are designed not just for a first home but also for retirement, however they do carry different rules for later life withdrawals. With this in mind, it is vital that savers read into all the terms and conditions before they invest so they are not left disappointed.”

How competitive is the LISA market?

Currently the LISA market remains uncompetitive, however this could change with the ending of Help to Buy ISAs. Last week, for example, Paragon Bank entered the LISA market with the launch of its Cash Lifetime ISA offering a rate of 1.15%. Saying this, the launch of Paragon Bank’s LISA takes the total number of providers offering a LISA up to just five. The top rate in the LISA chart is currently 1.40% being offered by Moneybox on its Moneybox Cash Lifetime ISA.

The full product LISA range:

Provider Account Gross rate
Moneybox Moneybox Cash Lifetime ISA 1.40%
Nottingham Building Society Lifetime ISA 1.25%
Paragon Bank Cash Lifetime ISA 1.15%
Newcastle Building Society Newcastle Cash Lifetime ISA 1.10%
Skipton Building Society Online Cash Lifetime ISA Issue 2 1.00%

Commenting on the current LISA market, Springall added: “Savers will find only a few cash LISA options available on the market today, with Paragon Bank the most recent contender. Consumers may want to take some time to analyse the offerings to see which will give them the appropriate channels to manage their account with ease, such as with an app or simple online banking.”

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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