The first cash Lifetime ISA has already proved popular with savers, with thousands opened in the first week of its launch.
Skipton Building Society, which became the first provider to offer a cash Lifetime ISA (LISA) earlier this month, has revealed that more than 15,000 accounts were opened between 6 June when some customers were able to open an account early via a special link and 14 June.
LISAs allow you to save and grab a 25% bonus from the state when you buy a home or turn 60 up to a maximum bonus of £32,000. Skipton is the only provider currently offering cash LISAs, although stocks & shares LISAs which come with added risk are also available.
How uptake of the cash LISA compares
The LISA was officially launched on 6 April this year, but it was a damp squib initially with only a few providers offering stock and shares options.
Uptake of the cash LISA seems to be faster than stocks & shares LISAs. Hargreaves Lansdown, which offers our top-pick investment LISA, says just over 13,000 were opened in the first month, compared with the more than 15,000 cash LISAs opened with Skipton in just eight days.
Both these figures are dwarfed by the 250,000 Help to Buy ISAs opened in the first two months after the product launched in December 2015 though it's worth remembering these were offered by more providers and with higher interest.
Get Our Free Money Tips Email!
Five cash LISA need-to-knows
We've full help in our Lifetime ISAs guide, but here are the need-to-knows:
- You must be between 18 and 39 to open one. If you've had your 40th birthday already, you've missed out. Once opened, the bonuses are paid until you're 50.
- You get a 25% bonus on everything you put in. For every pound you contribute a year up to the max, the state will add 25%, until you're 50. So save the full £4,000 and you'll have £5,000 each year.
- It's for first-time buyers. As long as you've never owned or part-owned a home you can use the money as a deposit for a UK residential property costing up to £450,000. You must be buying with a mortgage (though not a buy-to-let).
- Retirement savers can use it as well. The money and bonus can be withdrawn at age 60.
- There's a penalty if you withdraw cash for anything else. After 5 April 2018, withdrawals have a 25% penalty if you use the cash for anything apart from first-home buying or retirement. The maths works out that for every £100 you put in you'd get just under £94 back.
How does the Skipton cash LISA work?
The Skipton LISA has to be opened and managed online, and pays an annual interest rate of just 0.5%.
You can transfer in existing ISAs to it, including cash, stocks & shares and Help to Buy ISAs up to the maximum £4,000 annual LISA limit (plus any money saved in a Help to Buy ISA before 5 April 2017). See our Lifetime ISAs guide for full information, including Martin's video on LISAs vs Help to Buy ISAs.
If you opened a stocks & shares LISA when they launched back in April but don't want the added risk that an investment product comes with, you're also able to transfer your money to Skipton's cash LISA.
However, the T&Cs of the Skipton account allow it to decide to stop accepting transfers in. The building society says it hopes it won't have to do this, but it could happen, so if you want to transfer an ISA in, do it sooner rather than later to be safe.