Suren Thiru discusses the rise in interest rates
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The account is a Government-backed scheme where people can pay in up to £4,000 a year. But a leading provider of the ISA says many people don’t realise it comes with a 25 percent bonus on top of any money a person deposits.
Moneybox currently offers the best interest rate for the account, at three percent, including a 2.75 percent base rate and a fixed one-year bonus interest rate of 0.25 percent.
But the bank told Express.co.uk that many people sign up for the account without knowing about the 25 percent bonus.
The bonus means a person who deposits the full £4,000 in a tax year can get an extra £1,000 added to their balance.
Brian Byrnes, head of personal finance at Moneybox, said “At Moneybox we spend a lot of time on financial education as we feel it’s a crucial building block to long-term financial resilience.
“We spend a lot of time educating customers on the options available to them and given many of our customers are aiming to buy their first home, this often means the Lifetime ISA.
“Though a very popular account and broadly quite well understood, we do still see many customers pleasantly surprised when they understand the helping hand they will get on the way to their house deposit.”
Another feature of the Lifetime ISA that savers may want to note is that the Government bonus is paid directly into a person’s LISA after they have made a deposit.
This means that people can get more interest on their balance, the earlier in a tax year they pay into the account or put in the maximum £4,000.
Mr Byrnes said 15 percent of their customers who max out their LISA do it at the start of the tax year, in April.
Some 40 percent of savers do it at the last minute, in March or the first few days of April, while 10 percent pay in via regular equal payments. Another 35 percent add their deposits at seemingly random times or intervals.
For the Moneybox Lifetime ISA, interest is calculated daily, with deposits taken on Wednesdays each week.
Mr Byrnes said: “The 25 percent Government bonus means the Lifetime ISA is one of the few inflation-beating options out there and with the cost of living crisis ongoing and mortgage rates rising, it is important for first time buyers to take advantage of every boost and bonus available to them.
“That is why we are delighted to offer a market-leading LISA rate as well as whole-of-market mortgage advice.”
To open a Lifetime ISA, a person must be 18 or over but under the age of 40. A saver can pay in up to £4,000 each tax year, until the age of 50.
The money can go towards buying a first home, as long as the property costs £450,000 or less and the property is purchased at least 12 months after a person makes their first payment into the ISA.
People can also use the account to save for their retirement, as the money can be withdrawn once a person has turned 60.
There is a withdrawal charge of 25 percent if cash is taken out of the account for any other reason.
Other providers that offer the Lifetime ISA include:
- Beehive Money – 2.3 percent
- Skipton Building Society – 1.75 percent
- Paragon Bank – 1.6 percent
- Newcastle Building Society – 1.2 percent.
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