Nutmeg is to offer the new Lifetime Isa from next year, opening up sign-up over the summer.
“It is a very natural step for us. We will start offering people the chance to sign up in the summer but it will be ready in April next year,” says Nick Hungerford, Nutmeg’s chief executive and founder.
From 6 April 2017 the government will introduce the Lifetime Isa for anyone under the age of 40. For every £4,000 each individual saves the government will give them a £1,000 bonus. Individuals can continue saving until they reach the age of 50.
Savers will be allowed to use the money either to buy their first home or to save for their retirement. They can use the cash to buy a home any time from 12 months of opening, while they can use it from age 60 for use in retirement. However, they will not be taxed on any withdrawals from the savings pot.
Hungerford says: “The Lifetime Isa is a fantastic move. We expect it to be a hugely popular product, it will be one of the most rewarding savings products available. The uptake is going to be high.
“One of the common deliberations for young savers is: ‘Do I take a government match on a pension contribution and lock up funds until retirement or do I forgo that match so I can access my money sooner for something like a house deposit?’. Lifetime Isas avoid this dilemma.”
With the Lifetime Isa, money can be withdrawn at any time, subject to a 5 per cent charge and forfeiting any interest or growth and the government’s bonus.
The government will set a limit on any property purchased at £450,000, with this applying nationally.
Hungerford says the group is currently working on how to present the product to their clients saying the Lifetime Isa may bring “a lot of complications” to investors and providers since details on the product have not yet been finalised.
He says: “Customers need to make sure they understand the Lifetime Isa – all the details of how they work have not been finalised, which adds some uncertainty.
“Of particular concern for our London customers is how to use a Lifetime Isa given the cutoff for houses over £450,000. With the average London house price at or above this point it could complicate how people use the Lifetime Isa.”