Foresters Friendly Society launches With Profits Lifetime ISA
The mutual is one of only a handful of providers to offer the Lifetime (LISA) product, which allows anyone aged 18-39 to save up to £4,000 a year for their first home or retirement where they will gain a maximum £1,000 annual bonus from the government. See YourMoney.com’s Lifetime ISA guide for the full information.
So far, on the investment side, just Hargreaves Lansdown, Nutmeg and The Share Centre have launched an investment LISA and Skipton Building Society is the only lender to launch a cash version of the product.
However, Foresters Friendly Society today launched a With Profits stocks and shares LISA, which aims to provide customers with higher investment returns than cash, but with some protection from stock market volatility.
With Profit funds fell out of favour around the turn of the century, but they can be useful to smooth market volatility as they can withhold profits in good years and distribute them to members in more challenging years.
Foresters said it aims to pay an annual bonus in addition to a terminal bonus when funds are withdrawn. Savers’ money is invested in the Order Insurance Fund where it’s spread across a number of asset classes including equities, bonds, property and cash. It will also provide life insurance cover.
The LISA comes with a 1.25% annual management charge which is taken from the whole investment, a combination of the investor’s contribution and the government bonus, once it’s added to the LISA. This means if you contribute the maximum £4,000 where you receive the government’s £1,000 bonus, the 1.25% annual charge will apply on the full £5,000. Foresters confirmed there are no other charges for customers.
Currently it can be opened by post (download the form online) but savers will be able to open the product online from next week. Existing customers can save from £50 a month while for everyone else, there’s a minimum £100 per month investment limit. Otherwise, a £500 lump sum must be paid in.
Myles Edwards, membership director, said: “As a mutual society we don’t have shareholders so our profits are distributed to policyholders. With the low interest rates on cash-based saving products set to continue, the challenge for young savers with ambitions to own their own home or build a retirement income has never been greater.
“Foresters Lifetime ISA provides savers with transparent charges at 1.25%, a strong historical investment return (in the fund LISA contributions will invest in), life insurance cover, and the opportunity to boost savings with a £1,000 a year bonus from the government.”