The Isa with a 25 per cent bonus

SALLY HAMILTON ON LIFETIME CASH ISAS FROM NOTTINGHAM AND SKIPTON

THE Government’s Lifetime Isa (Lisa) was reprieved last week despite calls for it to be scrapped. Lisa lets under-40s pay up to £4,000 each year into a tax-free account to save towards a first house purchase – or retirement. They receive a juicy 25 per cent bonus and can save in shares or cash.

Those who have ambitions to purchase a home in just a few years’ time are safer using the cash version. But there are just two available – from building societies Skipton (online) and Nottingham ( in branch), both paying interest of one per cent. Newcastle, another building society, plans to launch one imminently. The proceeds of a Lisa can be used to buy a house ( maximum value £450,000) or be kept until age 60 and used as a retirement fund – though contributions and bonuses can only be added until age 50. The maximum possible bonus for an 18-year-old taking out a Lisa is £33,000. Withdraw cash early and there is a nasty 25 per cent withdrawal penalty. VERDICT: Current cash Lisa rates are poor when compared to those on ordinary cash Isas. But the 25 per cent Lisa bonus is a compelling reason to grab one if you are planning to buy a property soon, though not within the next 12 months as you need to hold an account for at least a year to earn the bonus. Do not bother with a cash version if you are using Lisa to accumulate a retirement fund. A shares version offers a greater chance of long-term investment growth.