The financial app, Moneybox, has teamed up with OakNorth Bank, to launch a market-leading cash lifetime ISA (LISA)*.
The new offering takes the total number of cash LISAs to just four, so every new entry in this market is welcome.
And with a rate of 1.40% tax-free/AER, it is head and shoulders above the other cash LISAs available, which are only paying up to 1.10%.
The Lifetime ISA can be opened by those aged 18 to 39 years old and contributions of up to £4,000 can be paid into the account each year – until the age of 50. For every deposit made, the Government will pay a generous 25% bonus into the account, so interest will be earned on both your contribution and the Government bonus. The proceeds from the account can be used to buy your first home, otherwise it must be held until the age of 60 - when it could be a useful boost in retirement.
The LISA was introduced in April 2016 but there has not been huge support from providers, especially in the cash LISA market. Far more providers offer the similar Help to Buy ISA, which also benefits from a Government boost of 25% - which is applied on the purchase of your first property only. As a result of this higher level of competition between providers, rates are better on the Help to Buy ISAs.
However, while there are similarities - and arguably the LISA is the better choice as more can be deposited- there are important differences. And a key point is that although both offer a 25% Government bonus, you can only use the bonus from one of the accounts for your first home.
While this is a market-leading account, it can only be opened via the Moneybox app, available on iPhone or Android, which is aimed at first time savers and investors - although there is no age limit.
However, as mentioned above, the LISA would actually be held with OakNorth Bank – and therefore if you have other savings with that provider that would take you above the Financial Services Compensation Scheme (FSCS) limit of £85,000, you should be aware that some of your cash would not be protected in the worst case scenario that OakNorth Bank were to become insolvent.
*We are occasionally paid by some providers if you click through from our Best Buy Tables and open a savings or current account with them. We will never accept a payment that compromises in any way our independent, whole of market approach to providing information on savings products. For clarity we will indicate those companies who remunerate us with an asterisk (*).