OneFamily to launch Lifetime Isa

OneFamily to launch Lifetime Isa

OneFamily, the mutual formed from the merger of Family Investments and Engage Mutual, is exploring opportunities in the controversial Lifetime Isa market.

The government announced the creation of the Lifetime Isa in the last Budget.

Sometimes known as a Lisa, the product will work in much the same way as a pension, locking away cash until a saver reaches a given age or buys their first property.

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The Lifetime Isa will only be available to those aged less than 40 at launch, and a bonus is added to savings by the government.

However, the Lifetime Isa does not permit employer contributions, and critics fear it will cannibalise pension saving.

Contributions into a Lifetime Isa receive a 25 per cent government bonus on any sum up to £4,000 a year.

This makes a total maximum annual investment of £5,000, and savers can continue to contribute until the age of 50.

You can withdraw the money without penalty at the age of 60 plus or to buy a first property or if you have a terminal illness.

Anyone wanting their money early for any other reason will pay a penalty of 25 per cent. 

This means that the Lifetime Isa can be used in the short term as a replacement for the Help to Buy Isa, which can be rolled into a Lifetime Isa, or as a retirement vehicle.

The Lifetime Isa has its share of critics.

Former pensions minister Baroness Ros Altmann recently said the government was pushing the product at the expense of better-value pensions.

She said: "Private pensions are far better than Isas in terms of their behavioural design.

"Using a pension, instead of a Lifetime Isa, should ensure you have more money in later life. Future governments will have to deal with the consequences of more poor pensioners, and greater strains will fall again on younger generations."

Insurance company Aegon asked the Financial Conduct Authority to ban cash Lifetime Isas, claiming that they are inappropriate as a savings vehicle for retirement.

OneFamily said it believed the Lifetime Isa is "a natural fit with their family-focused offer, which includes Lifetime Mortgages, adult and junior investment Isas and life assurance products."