The challenger bank said it is offering a competitive rate of 4.61% on the product, with a one-year bonus of 1% AER (variable) to boot.
As is the case with Lifetime ISAs, there is a 25% annual bonus on your funds included too, up to a maximum of £4,000.
You also need to be under 40 years old, and the savings can only be used to fund a deposit for a new home with a maximum worth of £450,000 – although this limit has been urged by lenders to be extended to match the average house prices on the market.
With Plum’s offer, all you need to do is open an account using the app and begin saving, which can start with just 1p.
Victor Trokoudes, the fintech company’s founder, said: “With the continued popularity of our Cash ISA since launch, it has become clear that many of our customers are keen to keep their money within a tax wrapper and benefit from high interest rates.
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“We’ll be bringing the benefits of ISAs to a new audience with the launch of our Lifetime ISA, which is designed to reward savers for having a goal and keeping up the habit consistently over time.”
Trokoudes added: “High interest, paired with tax benefits and the Government bonus, ensures that the returns from money set aside into the Lifetime ISA can give customers the opportunity to grow their cash over time. This should help them along the way to reach their key life goals, such as buying their first home, or saving for retirement”.
Here’s how it compares to other rates on the market.
‘Worth reviewing’ after a year
According to Anna Bowes, savings expert at the Private Office, the new offer is ranked in a plum spot of second place in the table of best buys.
Bowes said: “It’s worth noting that the rate of 4.61% does include a 1% bonus for 12 months; that is added at the end of the 12-month period, so it will be worth reviewing at that stage and perhaps switching to something more competitive.”
As well as keeping an eye on the deal after a year, it’s important to consider what savings accounts you already have.
Bowes added: “Another thing to be aware of is that Plum is not a bank – it’s a financial app – so the cash is held with Plum’s partner banks Lloyds and Citibank.
“As the proportion held with each bank can vary, it’s worth checking if you already have cash with either of those providers, so check the total held is within the Financial Services Compensation Scheme (FSCS) limit of £85,000.
“The top three Lifetime ISAs are all from these financial app companies; Moneybox, Plum and Tembo. For those who would prefer not to use an app to open and fund their LISA, the next best is with Paragon Bank – paying 3.51%.”
