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Is the lifetime Isa set to be a flop?

Banks aren't on board as April deadline looms

With only weeks until the lifetime Isa launches, not a single bank or building society can confirm it is ready to offer one, and many other Isa providers say they have no plans to make them available to customers, Which? Money can reveal.

Unveiled by Chancellor George Osborne in the Budget last year, the lifetime Isa is designed to help younger savers buy their first home or build up a retirement pot, with a government bonus worth up to £1,000 a year.

It should be available from 6 April 2017. However, most providers say they will not be launching new products in time – or even at all (scroll down the table below, we will update this as more providers confirm their position).

*UPDATE: Since we published this news story, the following changes have taken place:

  • RBS/NatWest has now confirmed that it will NOT be offering the lifetime Isa at this time (15/03/2017)
  • Skipton BS is the first provider to announce it will launch cash lifetime Isas from June 2017, with full details to be released nearer the time (20/03/2017)

High street banks still waiting for lifetime Isa rules

The biggest high street banks are the most likely to be ready and willing to offer a lifetime Isa, but they’re still waiting for details to be resolved.

HMRC told Which? Money that final guidance on the lifetime Isa rules is due to be published in the next few weeks – cutting it very close to the proposed 6 April launch date.

Barclays, HSBC (including First Direct) and Lloyds Banking Group (which includes Bank of Scotland, Halifax, Lloyds Bank) will confirm participation when regulations are finalised.

RBS/NatWest* said it’s not yet in a position to confirm either way, while Santander told us it has no plans to launch the lifetime Isa but will continue to keep its position under review. TSB is in a similar position stating: ‘As with any new initiative we may decide to review our plans once we have clarity on the final rules.’

Many of the smaller banks and building societies are also taking a ‘wait and see’ approach. Nationwide was one of the first providers to confirm that it wouldn’t be offering the lifetime Isa.

Other building societies have followed suit, including Coventry which hinted that the lifetime Isa is too complicated in its current form. It told us that ‘our approach is to offer members simple, easy to understand savings accounts and we don’t currently see a role for the lifetime Isa in our range of products.’

Stocks and shares lifetime Isas

Three stocks and shares Isa providers – Hargreaves Lansdown, Nutmeg and The Share Centre – say they will be in a position to offer the investment version of the lifetime Isa from day one.

Other platforms – AJ Bell, Scottish Friendly, and Wealthify – told us they are planning to launch investment lifetime Isas later in the tax year but couldn’t provide specific dates.

Bestinvest also blames the slow release of guidance from HMRC for the delay, but says it hopes to launch one later this calendar year. Fidelity said it intends to have a lifetime Isa available from next year so that customers don’t miss out on the first run of government bonuses.

The lifetime Isa: at a glance

  • When is it available? 6 April 2017
  • Who can open a lifetime Isa? Adults aged 18-39 (if you turn 40 on or before 6 April 2017 you won’t be eligible)
  • What do I get? For every £4 you save, the government will add £1 (worth up to £1,000 a year) paid at the end of tax year, up to the age of 50.
  • How much can I save? Up to £4,000 a year is eligible for the 25% bonus (you can add more but it won’t receive a government contribution).
  • When is the bonus paid? In the first year it will be paid annually, but from the 2018/19 tax year onwards the bonus is paid every month, so that you benefit from compound growth.
  • Can I invest in stocks and shares? Yes, you can invest in either cash or stocks and shares.
  • Does this sit within my overall Isa limit? Yes, your overall annual Isa limit will be £20,000 in 2017/18 for all payments into a cash Isa, stocks and shares Isa, innovative finance Isa, or lifetime Isa.
  • Can I spend the money on whatever I like? Under the age of 60 – no, you must use the cash to purchase a first property worth up to £450,000. After age 60 – yes, you can spend the money as you see fit.
  • Are withdrawals tax-free? Yes, as with other Isas, withdrawals are tax-free.
  • Are withdrawals penalty-free? It depends – if you use the money to purchase a first property, or withdraw after the age of 60, you won’t be charged. If you want to spend the money on non-property and you’re under the age of 60, you’ll be hit with a 25% penalty, although this will only take effect from April 2018.
  • Can I pass on my lifetime Isa to a partner? Yes, your spouse or civil partner can inherit the value of your lifetime Isa as an ‘additional permitted subscription’ (APS) allowance. For more on how to pass on an Isa, see our guide to inheritance Isas.
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