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Should I open a Cash Lifetime ISA? Which has the best interest rate?

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Touted as the solution for disillusioned young people who feel they may never get on the property ladder, the Lifetime ISA (LISA) was designed to give first-time buyers a bit of a leg-up. Not only does it act as a tax-free wrapper for your savings, it also boosts them with an extra £1 for every £4 you save (provided you’re saving for a first home or retirement).

So far, a handful of banks and building societies have released their stocks and shares flavours of the LISA. But there are only four Cash LISAs available, the most recent of which having been released today by Moneybox. So what’s on offer for long-term cash savers?

 

Is a Cash Lifetime ISA the right savings account for me?

If you agree with every one of the conditions below, a Cash LISA could be right up your alley:

• You want to boost your savings by cutting out taxes and earning top-ups from the Government

• You don’t need access to your money and only want to use it for either a first home or a retirement fund

• You prefer the stability of cash to the potential for higher returns from stocks and shares

• You are between 18 and 39 years old

 

Answered yes to all?

Sounds good so far. You might do well with a Cash Lifetime ISA, which lets you save up to £4,000 a year tax-free with a 25% bonus from the Government. In real terms, that’s up to £32,000 of free money you could rake in if you open the account at 18 and pay in until the maximum age of 50.

 

Answered no to any?

If you’re 40 or over, you can still get similar benefits from a Help to Buy ISA. Read a comparison here.

Or if you prefer to invest than to keep your savings in cash, Stocks and Shares Lifetime ISAs are also available. More info on those here.

 

Which provider should you get your Cash Lifetime ISA from?

There are currently only 4 Cash LISAs to choose from. They offer the same general features – free Government top-ups and tax-free savings, etc. – but have slightly different interest rates and conditions.

 

Skipton Building Society

1% tax-free interest
Minimum deposit £1
Can only be opened and managed online
Balance transfer from another ISA is fine
Offer of £250 cashback on a Skipton mortgage


Nottingham Building Society

1% tax-free interest
Minimum deposit £10
Can be opened both online and in branch
Balance transfer from another ISA is not allowed
Free access to mortgage advice services, usually £249


Newcastle Building Society

1.1% tax-free interest
Minimum deposit £1
Can only be opened online
Balance transfer from another Lifetime ISA is fine


Moneybox (with OakNorth Bank)

1.4% tax-free interest
Minimum deposit £1
Can only be opened and managed through Moneybox app
Balance transfer from another ISA is fine


Would you be better off with a Help To Buy ISA?

In the table below are the main differences between a Cash Lifetime ISA and a Help To Buy ISA. Basically, if you’re over 40 years old, or you want to buy a home within the next 12 months, a Help To Buy ISA would be more appropriate.

There are other instances too, so make sure you read up on the differences before you commit.

 

Take a closer look at the details in our comparison article

 

If you’re saving for your first home, best wishes from us! You might also find these tips useful – from choosing a mortgage to making an offer to figuring out all the fees: How to save for your first property

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