Lifetime Isas have become available today, designed to help under 40s save for their first home or for retirement. But no banks or building societies are currently offering one for cash savers - leaving first-time buyersunable to grab a £1,000 bonus.
With a lifetime Isa, younger savers canget a 25% government bonus on savings of up to £4,000 each year, on top of interest. That works out as a free government bonus of up to £1,000 a year.
The government will pay the bonus after 12 months in the 2017-18 tax year. From April 2018,it will pay a monthly bonus until your 50th birthday.
However, so far only one company - Skipton Building Society - has confirmed itwill launch a for cash savings, butnot untilJune. It has yet to reveal what interest rate the Isa will pay, nor any other details about the product.
First-time buyers should use a cash savings Isa, rather than an investment Isa, to build up a deposit, as it's money they can't afford to lose.
Other high street providers such as Barclays, HSBC and Lloyds Banking Group (which also includes Halifax and TSB) have said they are continuing to review their options.
Nationwide has ruled out offering a lifetime Isa altogether and Santander has said it currently has no plans to offer one.
Lifetime Isas are also available if you want to invest in stocks and shares.
These are better suited to people saving for retirement, rather than saving a mortgage, as there is there is always the risk that you could lose, as well, as grow your money, and investing is not recommended if you need short-term access to your funds.
Threestocks and shares Isa providers are offering lifetime Isas fromtoday - Hargreaves Lansdown, Nutmeg and Share Centre.
Other companies, such as AJ Bell, Wealthify, Fidelity and Bestinvest, told us they plantolaunch lifetime Isas later in the tax year.
Scottish Friendly has launched what it calls a 'Lisa Access' product, which it says will make it easy to transfer to a lifetime Isa once it launches one later in the year.
The table below shows the lifetime Isa plans of major banks, building societies and investment companies.
These Isas are available to first time buyers looking to purchase a property worth up to £250,000 (or £450,000 in London).
A range of well known banks andbuilding societiesoffer Help to Buy Isas.
Help to Buy Isas also pay a government bonus of up to 25%, but you can only save up to £2,400(or £3,400 in the first year), compared to £4,000 in a lifetime Isa.
If you're looking to buy your first home in the next year or so, a Help to Buy Isa could bea better option.With a lifetime Isa, you're not allowed to withdraw moneyand redeem your bonus until you've had the account for a year, meaning your savings will be locked in.
However, you're not planning to buy for a couple of years, lifetime Isas may be more attractive for aspiring home-buyers as:
During the 2017-18 tax year, anyone with an existing Help to Buy Isa will be able to transfer their current savings (as of 5 April 2017) across to a new lifetime Isa, without these funds counting towards their savings limit for the tax year.
|Lifetime Isa||Help to Buy Isa|
|Who can open one?||Savers aged 18-39||Any first-time-buyer aged 16 or older|
|How much can I save in one?||Up to £4,000 a year||Up to £2,400 a year (£3,400 in the first year)|
|What is the maximum government bonus?||£32,000 (if you saved £4,000 every year, for 32 years)||£3,000|
|When is the bonus paid?||Once in the 2017/18 tax year. Once a month after that.||When you buy a property (no bonus will be paid if you don't use it for a property purchase)|
|Can I withdraw the money if I'm not using it to buy a house?||Yes, but you will pay a penalty if it is before your 60th birthday||Yes, but you won't receive the bonus|
|Will I pay a penalty for early withdrawals or if I don't use the money to buy a house?||You will pay a 25% penalty if you withdraw the money before your 60th birthday||No|
|Maximum Property Price||£450,000||£250,000 (or £450,000 in London)|
The government has stressed that a lifetime Isa should not be viewed as a replacement for pension savings.
However, it could be worth considering if you are self-employed, and don't get a pension contribution from an employer.