Skipton Building Society to launch cash Lifetime Isa
A cash version of the Lifetime Isa, giving first-time buyers a helping hand onto the property ladder, is set to be launched this week.
Launching on Thursday, Skipton Building Society's deal will pay an annual interest rate of 0.5%. It will only be available online, although Skipton said branch staff will be on hand to help with savers' questions.
Skipton's cash Lifetime Isa can be opened online with just £1. First-time buyers who decide to take out a mortgage with Skipton, either directly or via intermediaries, will also receive £250 cashback.
Lifetime Isas, or Lisas, can be opened by people aged between 18 and 39 to save for their first home, or their retirement, in the same pot, with a government bonus added.
Lisas were unveiled during the Budget in March 2016 by the then chancellor, George Osborne.
Some providers, including Hargreaves Lansdown and Nutmeg, launched investment versions of the Lifetime Isa when the scheme got under way in April 2017.
Many of Britain's biggest banks said when the scheme launched that they either had no immediate plans to offer a Lisa, or that they were reviewing their position.
Other schemes, such as the Help to Buy Isa, are also available to help first-time buyers.
Rachel Springall, a finance expert at Moneyfacts.co.uk, said there are Help to Buy Isa rates available which beat the 0.5% cash Lisa rate. For example, Barclays' Help to Buy Isa pays 2.25%.
She said across the market generally, the average cash Isa rate is also higher, at 0.87%, with Virgin Money offering a market-leading easy access Isa at 1.05%. Paragon Bank offers a five-year fixed-rate cash Isa at 1.8%.
Ms Springall said Skipton's deal may appeal to savers who do not feel comfortable applying for a stocks and shares Lisa - particularly those looking to save over the short-term, such as first-time buyers.
But she continued: "Those savers looking to use a Lisa for retirement may be wiser to seek out a stocks and shares version where they could see much higher growth over the longer term."
Savers can split their overall 2017-18 Isa allowance of £20,000 across a range of different Skipton products and make the Lifetime Isa part of their wider savings portfolio, the mutual said.
The building society said it anticipates "strong" interest for the product - and people can register in advance on skipton.co.uk.
Lisa schemes allow people to put away up to £4,000 each year and receive a Government bonus of up to £1,000 a year on their contributions until they turn 50.
Over their lifetime, people saving into a Lifetime Isa could potentially get a maximum bonus of £32,000.
Savings can be used to buy a first home or used for other purposes after the saver reaches 60. But generally, savers withdrawing their money early for reasons other than buying their first home face withdrawal charges.
Critics of Lisas argue they could put some people off saving into their workplace pension, where they get the benefit of "free" money into their retirement pot from employer contributions and tax relief.
The Association of British Insurers (ABI) has said that while the Lisa will be a very useful savings scheme for some people, it must not undermine the success of automatic enrolment into workplace pensions.
Kris Brewster, head of products at Skipton Building Society, said: "As a building society, our purpose has always been to support people in planning and preparing for their life ahead. And being the first in the UK to give savers more choice with the cash Lifetime Isa, this is another way of us continuing that commitment."