They launched with a whimper rather than a bang, but four months on, Lifetime Isas – or Lisas – seem to be proving popular. This week, Skipton building society revealed that 28,000 people had opened its cash version of the Lisa in just six weeks. And investment firm Hargreaves Lansdown said it had opened more than 22,000.
Launched in April, a Lisa lets you save tax-free for either a property or retirement. The crucial difference to standard Isas is that you also get a government bonus equal to 25% of what you save. It will be yours to keep either when you buy a property or reach 60.
The maximum amount you can save into a Lisa each year is £4,000, so the government would give you a £1,000 bonus on that amount. You can open the account any time between the age of 18 and 40, and earn a bonus each year until you reach 50.
Skipton launched its cash Lisa on 6 June and is the only provider with a high street presence. It said the account has been popular with younger savers looking to take advantage of the government’s bonus. More than half (51%) of those who have opened an account are under the age of 30 and looking to boost their savings to turn their dream of becoming a homeowner into a reality, said a spokeswoman.
Skipton’s Lisa can be opened online and pays 0.5% interest. The society said a 25-year-old maximising the annual allowance for eight years would have a pot of around £40,776 by the age of 33.
However, Hargreaves Lansdown said most people would be saving via this type of account for at least five years, and so should think about opting for a stocks and shares Lisa rather than a cash one to give themselves the best chance of good returns. Other providers of stocks and shares Lisas include The Share Centre and Nutmeg.
