Nottingham Building Society has today launched a cash lifetime Isa paying 1% AER.
This only the second cash lifetime Isa to launch since the product first became available in April 2017, and comes after MPs on the Treasury Select Committee controversially called for the abolition of the government savings product.
Which? explains what the new lifetime Isa offers, how it compares to others on the market, and whether it could be right for your savings.
What does the Nottingham Building Society lifetime Isa offer?
The lifetime Isa is a cash Isa, paying 1% AER on all money saved into the account. Interest is paid annually.
There’s a £10 minimum initial deposit to open the account, and then you’ll be subject to the usual lifetime Isa rules of being able to pay in a maximum of £4,000 per year.
What’s more, lifetime Isa account holders will be able to save on the £249 fee usually charged to access the building society’s mortgage advice service.
No Isa transfers allowed
There are a couple of sticking points, though – the main one being that Nottingham Building Society will not accept transfers from any other Isas into the new lifetime Isa.
This means if you’ve already paid into a Help to Buy Isa, for instance, you won’t be able to move that money into this account to continue saving for your first property; people who already have a lifetime Isa won’t be able to move to this provider.
Geographical restrictions apply
Along with the lifetime Isa only being available to those aged between 18 and 39, only those living within The Nottingham’s branch network can currently open the account.
This means that only those living in Nottinghamshire, Derbyshire, Lincolnshire, Staffordshire, Norfolk, Leicestershire, Cambridgeshire, Hertfordshire, South Yorkshire, Bedfordshire and Northamptonshire will be able to open the account, and to do so you must make an appointment in-branch.
To those who live nearby, this may not be an issue, but those in the rest of the UK will have to wait until later in the year, when the product is scheduled to be made available online.
If you’re interested in signing up for the account once it’s online, you can register your interest now.
How does it compare with other lifetime Isas?
There are currently 10 other lifetime Isa providers.
The only other cash lifetime Isa on the market is offered by Skipton Building Society, which – as of earlier this month – also offers 1% APR.
Skipton’s account is online-only, and does not offer access to mortgage advice like Nottingham does.
It does, however, offer £250 cashback on a Skipton Mortgage. Plus, Skipton’s account is already available nationwide and online, and has more than 100,000 lifetime Isa savers.
All other providers offer stocks & shares Isas, which all come with an added element of risk as they invest money on your behalf.
Despite, in its document introducing the lifetime Isa, government assurances that ‘individuals will be able to transfer their Lifetime Isa within 30 days between providers to get the best deal’, Nutmeg, OneFamily and Hargreaves Lansdown also don’t accept existing lifetime Isa customers to move their accounts over to them. Other providers will.
Unlike The Nottingham, however, all providers accept transfers from other Isas, such as Help to Buy Isas.
Find out how all of these Isas work in our full guide to lifetime Isas.
Should I get a lifetime Isa?
Perhaps the first thing to bear in mind when considering a lifetime Isa is whether you’re eligible to open one.
This product is only available to people aged between 18-39, so if you’re any older or younger, it’s a no-go.
Also think about what you’re saving for, and how long you’re prepared to lock your cash away for.
If you’re not a first-time buyer, be mindful that you won’t be able to access your cash until you’re 60 – or else face a hefty withdrawal penalty.
But, if you’re sure you’ll be using the money for your first home, or you can afford to lock it away until you’re 60, the lifetime Isa could be a good option.
Those who save the maximum amounts from the age of 18 until 50 can earn up to £32,000, which can make a huge difference to your saving pot.
If you have any doubts, it could be worth looking into other cash Isas or alternative savings options that will allow you to access your cash more freely.
- Find out more: How to find the best cash Isa
What is a lifetime Isa?
The government launched the lifetime Isa in April 2017 as a product to help people save for their first home and/or to fund their retirement.
You can pay in up to £4,000 a year, and receive a 25% government bonus of up to £1,000. As of April 2018, this bonus is paid monthly.
The contributions you make sit within your overall Isa limit of £20,000. So, if you pay £4,000 into a lifetime Isa, you’ll only be able to pay a maximum of £16,000 into another Isa in the same tax year.
Withdrawals – if made to buy your first home or when you’re over 60-years-old – are tax-free. Making a withdrawal for any other reason, other than a terminal illness, will incur a withdrawal penalty.
To use your savings to buy a property, you must be a first-time buyer and intending to use the property as your home. The property can be anywhere in the UK, but with a maximum value of £450,000.
Editor’s note: This article was previously published stating that anyone who had opened a cash Isa in this tax year would have to wait until 6 April to open this lifetime Isa – this is not the case.