Skipton launches first ever cash Lifetime ISA
Savers can now open a Lifetime ISA – also known as a LISA – with a minimum deposit of £1. It will pay 0.5% interest on up to £4,000, though the rate is variable so it can go up or down.
The account can only be opened and managed online. The Skipton confirms that it will accept transfers of the Help to Buy ISA to the new LISA account. See YourMoney.com’s First-time buyer: Should I transfer my Help to Buy ISA to the Lifetime ISA? for more information.
First-time buyers who decide to take out a mortgage with Skipton, either direct or via an intermediary, will also receive £250 cashback in addition to Skipton’s existing mortgage offers.
The government launched the Lifetime ISA in April to help young people save for a house, or for retirement. It offers savers a 25% government bonus.
At launch, no banks or building societies offered a cash LISA. Three providers – Hargreaves Lansdown, Nutmeg and The Share Centre – currently offer investment versions of the savings product.
People aged 18-40 can save up to £4,000 each tax year into either a cash or investment version of the product and receive a government bonus of 25%.
The money must go towards a first home worth under £450,000 or be used when the saver reaches 60 or over towards retirement.
Apart from in the first year, the government will charge an exit penalty of 25% on the entire amount including investment growth if the money is withdrawn and not used for a first home before the age of 60.
A 25 year old maximising the product’s £4,000 annual allowance for eight years will have an estimated pot of £40,776.53 by the age of 33, an amount higher than the average first-time buyer deposit, according to Skipton.
Kris Brewster, head of products at Skipton, said: “As a mutual, we’ve been helping first-time buyers and savers for over 160 years. The Lifetime Cash ISA could make a real difference to a new generation of savers by assisting them in getting a foot on the property ladder. That is why we’re excited to offer a product that will encourage future homeowners to save towards this significant milestone.”
Savers can split their £20,000 ISA allowance across a range of different Skipton products and make the Lifetime ISA a part of their wider savings portfolio.
‘Paltry’ interest rate
Andrew Hagger, a personal finance commentator from Moneycomms.co.uk, said: “Although it is good that Skipton has grasped the nettle and launched a cash based LISA, at the same time the interest rate offered as part of the deal is extremely disappointing.
“0.5% is pretty paltry particularly when there are already a handful of instant access savings accounts and ISAs paying more than double that rate.
“The key issue is at the moment there are no other cash LISA providers so without any competition to worry about The Skipton knows it doesn’t have to offer a generous rate as potential house buyers will still snap up the product purely because of the generous government incentives.
“You can’t blame Skipton for taking this stance but equally it’s frustrating that other providers don’t seem interested in providing this much needed product.”
YourMoney.com contacted both the British Bankers’ Association and The Building Societies Association to find out if they’re aware of any other lenders planning to launch a cash version of the LISA. They told us they’re not aware of any banks or building societies planning to launch the new ISA product.
Foresters Friendly Society has today launched a With Profits LISA. Click the link for more information.