Moneybox launches market-leading cash Lifetime ISA

It offers a far better rate than the other three providers that offer cash Lifetime ISAs (LISAs), which are Newcastle Building Society – which pays a rate of 1.1% – and Skipton Building Society and Nottingham Building Society – which both pay 1%.

A LISA lets you save up to £4,000 every tax year towards your first home or your retirement, with the state adding a 25% bonus on top of what you save. That means you could get a chunky £1,000 of free cash annually. Plus you earn interest on whatever you save, and as it's an ISA, that interest is tax-free.

See our Lifetime ISAs guide for full info.

What's a Lifetime ISA?

Here are the key LISA need-to-knows:

• A LISA can be opened by anyone aged 18-39.

• You can save up to £4,000 a year.

• You get a 25% state bonus paid on top (up to a maximum of £33,000).

• You'll pay a penalty if you withdraw the cash for anything other than your first home or before you turn 60.

For first-time buyers, a cash LISA can be used towards the purchase of a property worth up to £450,000.

If you're using it to save for retirement, you can save in it until the day before your 50th birthday, and withdraw the cash and bonus when you turn 60.

How does the Moneybox LISA work?

The product is only available through the Moneybox app and can be opened with as little as £1.

The Moneybox LISA will also accept transfers in, including from people aged over 40 who already have LISAs with other providers.

The LISA is offered in partnership with OakNorth Bank, which is covered by the Financial Services Compensation Scheme – so customer deposits of up to £85,000 are protected in the unlikely event that the firm collapses.