Lifetime Isa bonus matches Help to Buy in half the time

Lifetime Isa bonus matches Help to Buy in half the time

Lifetime Isa bonus payments matched those of its rival product in half the time, amid speculation the product is not popular among savers.

In a July statement, the HM Treasury reported more than £130m had been paid in Lifetime Isa bonuses since it was launched - matching the total value of Help to Buy Isa bonus payments since its introduction.

The Help to Buy Isa launched in December 2015, almost a year and a half before the Lifetime Isa was introduced in April 2017.

Lifetime Isa provider OneFamily calculated investors in the scheme had received an average bonus of £764 each and suggested the frequency of monthly bonus payments encourages investors to save more.

Nici Audhlam-Gardiner, managing director of Lifetime Isas at OneFamily, said the product had recently been subject to "unhelpful" speculation, with the Treasury select committee recommending it be scrapped completely, claiming it was too complex and not popular enough.

But she said these bonus figures demonstrated the unique benefits savers can access.

Ms Audhlam-Gardiner said: "We know from our customers that they are delighted with the growth they are seeing on their investments, as they can see the benefits in real time."

She added the Help to Buy Isa had a major flaw in that the bonus is not paid until the Isa is closed, meaning savers do not benefit from regular top-ups and as the money was only available on completion of the sale of the property, they could not use it for a deposit.

She said: "Furthermore, the maximum bonus available is just a tenth of what savers can get on a Lifetime Isa - unfortunately, many savers are not aware of this so end up with a product that is not ideal for their needs."

The Treasury select committee report said the product should be scrapped due to its perverse incentives and its inconsistency with other parts of the long-term savings landscape, which it claimed had contributed to a limited take-up by customers and providers.

But Ms Audhlam-Gardiner said it was harder than ever for young people to save and the Lifetime Isa offered a helping hand for those aged under 40.

She said: "We urge the government to add further weight to promoting the Lifetime Isa and consider how it can be further enhanced - it is a huge help to the younger generation in achieving two of life’s biggest financial challenges of buying a first home and saving for a comfortable retirement."

The Lifetime Isa offers a 25 per cent government bonus on money invested, up to £1,000 a year - the Help to Buy Isa offers a government bonus of 25 per cent but up to a maximum of £3,000 in total.

Anna Bowes, director at Savings Champion, said the introduction of the Lifetime Isa added another layer of complexity to the savings landscape but in saving for a home, each Isa has its strengths depending on the saver’s criteria.