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First cash Lifetime Isa launched First cash Lifetime Isa launched
(about 4 hours later)
Savers will be able to save cash into the government's new Lifetime Individual Savings Account (Isa) for the first time from Thursday.Savers will be able to save cash into the government's new Lifetime Individual Savings Account (Isa) for the first time from Thursday.
Skipton Building Society is launching a product with an interest rate of 0.5%.Skipton Building Society is launching a product with an interest rate of 0.5%.
Currently only three providers are offering the Lifetime ISA, but those require investment in shares.Currently only three providers are offering the Lifetime ISA, but those require investment in shares.
Money saved in a Lifetime Isa is designed for buying a first home, or for retirement. The government offers savers a 25% annual bonus.Money saved in a Lifetime Isa is designed for buying a first home, or for retirement. The government offers savers a 25% annual bonus.
Savers have to be under the age of 40. The accounts can be opened by savers aged between 18 and 39.
Compared to other cash Isas, the Skipton's interest rate is relatively low. Rival providers of instant access Isas offer returns of more than 1%.Compared to other cash Isas, the Skipton's interest rate is relatively low. Rival providers of instant access Isas offer returns of more than 1%.
"I would say it's a disappointing rate, but they know there's going to be a big inflow, because of the government top-up," said Simon French, chief economist at Panmure Gordon."I would say it's a disappointing rate, but they know there's going to be a big inflow, because of the government top-up," said Simon French, chief economist at Panmure Gordon.
As a result, those who save before the end of the tax year will get an effective rate of return of 25.5% on up to £4,000.As a result, those who save before the end of the tax year will get an effective rate of return of 25.5% on up to £4,000.
However there are heavy penalties for withdrawing money from a Lifetime Isa if you do not buy a property, or if you take the money out before the age of 60.However there are heavy penalties for withdrawing money from a Lifetime Isa if you do not buy a property, or if you take the money out before the age of 60.
The Skipton said that anyone aged 25 who saved the maximum amount would have a pot worth £40,776 by the age of 33 - more than the average first-time buyer deposit.The Skipton said that anyone aged 25 who saved the maximum amount would have a pot worth £40,776 by the age of 33 - more than the average first-time buyer deposit.