Banks shun Lifetime Isa over mis-selling fears

THE Government’s Lifetime Isa scheme is in chaos as not a single high street bank is offering the accounts, amid fears they could result in a misselling scandal.

The lifetime Isa – or “Lisa” – is launching today but only three providers have agreed to offer it, one of which was last night accused of ripping off savers with “disturbingly” high fees.

Daily Telegraph calculations show that the Share Centre’s Lifetime Isa will leave savers as much as £60,000 worse off than they would be by saving into a company pension over 30 years.

It is offering savers a choice between three investment funds which charge fees of between two and 2.1 per cent – three times more than the Government’s charge cap on workplace pensions, which is 0.75 per cent.

Baroness Altmann, a former pensions minister who has previously said the Lifetime Isa should be scrapped as they could lead to a mis-selling scandal, said: “These charges are deeply disturbing in my view. Young people deserve better than this and the Treasury is letting them down badly.”

The calculations are based on someone investing £4,000 a year, receiving a 25 per cent bonus and making 5 per cent annual returns. A saver being charged 2.1 per cent a year would be left with £240,782 compared with £304,714 if the charge were 0.75pc.

The Share Centre defended its fees saying the investments, known as “funds of funds” were a good value option for savers who didn’t have time to do their own research.

The accounts can be opened by people aged between 18 and 39 to save for their first home, or their retirement, in the same pot.

Hargreaves Lansdown and Nutmeg will also offer Lifetime Isas. A Treasury spokesman said: “We fully expect the provider market to grow throughout the year as providers put their systems in place and develop their products.”