Lifetime ISA holders set to receive first bonus
The government bonus is worth 25% of the original amount invested, with the maximum set at £1,000.
While there are no official statistics yet for the number of people opening a Lifetime ISA, Hargreaves Lansdown reported 3,349 people opened one on the first day they were available. That has grown to more than 40,000 accounts. Skipton Building Society, the only cash LISA provider, reports more than 102,000 have opened accounts.
In fact, Skipton LISA customers are set to receive more than £80m in government bonuses to their accounts today. While the LISA can be used by holders to help buy their first property or for retirement, Skipton said nine in 10 want to take advantage of the scheme to get on the property ladder.
Kris Brewster, head of products at Skipton Building Society, said: “We are delighted to have received over £80m in cash LISA bonus from HMRC today and excited to be sharing this sizeable boost with our LISA savers.
“The extra government bonus from the LISA will help first-time buyers on their journey towards buying a home. The success of this account to date sends a real signal of intent from our younger members that despite increasing house prices and squeezes on our wallets they are making a determined effort to get the keys to their first home.”
However, other providers may have different dates at which the bonus is added to customer accounts, though the government has guaranteed that bonus payments will be made by 4 May.
Sarah Coles, personal finance analyst at Hargreaves Lansdown said: “In the current tax year, LISA providers had two weeks from the start of the tax year in which to apply for the bonuses (20 April). The government then has two weeks from then in order to pay those bonuses. It therefore guarantees payment by 4 May, and it’s possible first bonuses were paid as early as 24 April. It means we could see the LISA first movers any day now.”
Coles added that Hargreaves Lansdown submitted its claims for early bird ISA investors on 6 April, to give HMRC as long as possible to process the claims and facilitate the earliest possible payment of bonuses.
Take action with your bonus
LISA provider AJ Bell said it expects LISA bonuses to be credited to customer accounts early next week.
However, unless people have a regular investment service via their investment platform, LISA holders will have to log into their account and decide how to invest the extra money.
YourMoney warned LISA holders that they need to take action or their bonus could sit in a no return cash account.
Tom Selby, senior analyst at AJ Bell, said: “The important thing they need to remember is that this won’t necessarily be invested automatically, depending on the account they have. Many people will need to check their accounts and decide how they want the bonus invested. They might also take this opportunity to invest their £4,000 allowance for this tax year because from now on the bonus gets paid monthly so they will receive the extra money into their account much quicker.”
AJ Bell reported that, to date, the majority of funds within LISAs have gone into passive funds. Eight out of the ten most-purchased funds are passive funds with only two active funds making the list – Fundsmith Equity and Scottish Mortgage Investment Trust.