20/04/17No rush for the Lifetime ISA as only three providers offer products at launch
Since being announced in the 2016 Budget, the Lifetime ISA (LISA) has been divisive. With a whole host of advantages and disadvantages, the LISA has been hailed by some as perfect for the Millennial generation, and belittled by others as nothing more than a half-baked gimmick.
Regardless of how useful the LISA is going to be, it has experienced a very slow start, with only three providers offering it on launch day. This article explores the introduction of the LISA, and looks at why most major banks and building societies are either distancing themselves from it, or approaching it with caution.
What is the LISA?
For the uninitiated, the absolute basics are:
- It is a savings and investment product for 18-50 year olds (only under 40s can open one)
- A maximum of £4,000 can be paid in per year (which will be taken out of your annual ISA allowance of £20,000)
- The Government will add a 25% bonus on any money saved
- It’s available in both a Cash and Stocks & Shares format
- It can only be used to buy a first home worth less than £450,000, or after the age of 60 without incurring penalties
There are other regulations that must be navigated, but at its core, the LISA is designed to be a versatile account that can help first-time buyers or encourage people to save for their future.
Who is offering the LISA?
There may be more at the time of reading this, but at launch only three providers offered the LISA, all of whom were investment platforms. No Cash LISAs were available at launch, but Stocks & Shares LISAs were being offered by the following providers:
- Hargreaves Lansdown, who required a lump sum of £100 or a monthly commitment of £25 to open an account
- Nutmeg, who required a minimum of £100 to open an account
- Share Centre, who required a minimum of £1 to open an account
There was technically a fourth provider on launch day, with Metfriendly offering their LISA exclusively to Police Officers and their immediate family members.
How many LISAs have been opened?
The LISA providers reported that on launch day:
- Hargreaves Lansdown opened 3,349 accounts
- Nutmeg opened 1,217 accounts
- Share Centre opened several hundred accounts
When the Help to Buy ISA was launched in 2015, the Government reported that 250,000 accounts were opened in the first three months, equal to around 3,000 per day. This means that so far the LISA is performing comparably, if not slightly better than the Help to Buy ISA. It is, of course, far too soon to tell, but the fact that major banks and building societies are shying away could mean that these early figures lose momentum.
Why aren’t banks offering the LISA?
Banks and building societies are offering a myriad of reasons as to why they aren’t making the LISA a priority. A recurring answer seems to lie in the fact that the product itself will be very complex, so more time is needed to fully understand and roll the LISA out.
Nationwide stated in December 2016 that the complicated nature of the LISA will mean that they won’t offer it, and recently they, along with RBS, expressed their intentions to focus on the Help to Buy ISA, which will be available to open until November 2019.
Lloyds is still in the process of deciding, along with HSBC who announced in their 2016 budget summary that any plans for the LISA will be confirmed in due course.
It isn’t all bad news though for those looking to open their own account. There are plenty of providers out there who have expressed an interest in offering the LISA at some point in the year, such as:
- AJ Bell
- Fidelity International
- Skipton Building Society
- Standard Life
It is far too soon to predict how popular the LISA will be, but so far it is performing as well as the Help to Buy ISA did in its early days. Whether it keeps up that momentum is yet to be seen, but one things is clear; the lack of providers hasn’t been a barrier for the 4,500+ people who opened an account on launch day.