It is fair to say that lifetime ISAs, alternatively known as LISAs, got off to rather a slow start.
Launching with a whimper rather than a bang, their initial introduction was arguably underwhelming, but four months in, it seems that their popularity has experienced a gradual yet marked turnaround.
Indeed, according to figures released by Skipton Building Society, a phenomenal 28,000 people have opened the cash version of their LISA in the last six weeks alone – a trend also noted by investment firm Hargreaves Lansdown, which claims to have opened more than 22,000 of its investment version since their introduction.
Introduced in April 2017, LISAs promised to be an innovative investment instrument.
Giving those who utilise them the chance to make tax-free savings for either property or retirement, they differ from more traditional ISA by granting savers a government bonus equating to 25 percent of what they save. This can be claimed when those with such an account either purchase a property or reach 60 years of age.
The maximum that can be placed in such an account is £4,000 per annum, meaning that the government will grant savers up to £1,000 in free cash each year. Such accounts can be opened any time between the ages of 18 and 40, with bonuses earnable until those who utilise this investment instrument reach 50.
Interestingly, Skipton is the only high street presence to offer a cash LISA, having launched its on 6th June 2017. Its popularity thus far looks set to change this, with many younger savers having shown themselves keen to take advantage of the government bonus attached to it.
The figures certainly make for thought-provoking reading, with over half (51 percent) of those who have a LISA being younger than 30, and having opened their account to boost their savings and transform their dream of owning a property into a tangible reality, according to a spokesperson for the building society.
The company has made it as easy as possible for savers to open one of their LISA accounts, making it eminently simple for interested parties to create one online. Paying interest at a rate of 0.5 percent, they have made it so that an average 25-year-old utilising their annual allowance for just eight years would be left with a total of roughly £40,776 by the time they reached 33.
This arguably makes a LISA seem like an incredibly attractive investment instrument to younger savers, but there are those who have urged caution before taking one out, including experts Hargreaves Lansdown.
The investment firm’s warning is based on the fact that those saving through such an account would need to do so for at least five years, which in their learned opinion may make a stocks and shares ISA the better choice for those hoping for strong returns over the longer term.
A spokesperson for a UK-based savings comparison website stated, “Whilst it is a worthwhile product for younger savers looking to buy their first property, homeowners should take time to understand all of their options beforehand, as with a LISA they would lock themselves into a savings instrument that cannot be accessed until retirement.”