Where can I get the new Lifetime Isa?
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Savers hoping to open a lucrative new Isa account in April look set to be disappointed as many banks and brokers say they are unable to offer the product.
The Lifetime Isa, which offers a 25 per cent government bonus on savings of up to £4,000 a year to anyone aged over 18 and under 40, officially becomes available to savers in the new tax year, starting April 6.
However, rules from the financial regulator on how providers should sell the Lisa are not due until mid-March, while final details from the tax authorities are also yet to be finalised.
Potential providers, including Barclays, Lloyds, Halifax, Standard Life, AJ Bell YouInvest, Fidelity Personal Investing, TD Direct Investing, and Tilney Bestinvest have told FT Money they will therefore not be offering the product in April, while NatWest and HSBC both declined to say whether they would offer the savings account.
While some providers have said they will launch the Lisa at some point during the tax year ending in April 2018, others are less certain.
Michelle McGrade, chief investment officer of TD Direct Investing, said the company would “see how it goes”, and voiced concerns about how investors would perceive the dual purpose of the account, which is intended to both help those looking to buy a home while also encouraging retirement saving.
“We don’t want to be a leader in it,” said Ms McGrade. “I like the idea. I don’t think it’s bad, I just think it’s confusing.”
Ms McGrade’s concerns echo those made by pension experts. Steven Cameron, pensions director at Aegon, has said the two aims of saving for a home and saving for retirement are “incompatible” as they require very different investment strategies.
Other experts, including former pension ministers Sir Steve Webb and Baroness Altmann, have argued that the Lisa could tempt younger people away from workplace pension schemes, causing them to lose the benefit of employer contributions.
Standard Life also said it has “deferred” its launch until it has “reviewed how customers engage with this new product”. The company said it felt the Lisa was “useful”, but that workplace pension schemes will be the “best long-term savings option for the vast majority of people”.
Most other providers simply said they were unable to launch without adequate time to make sure they were implementing the regulator’s guidance correctly.
AJ Bell, a retail broker, said the company would need time to build the appropriate risk warnings.
Others have said the technology burden of implementing the product was large, and that they would prefer to wait for the final guidelines from both HM Revenue & Customs and the Financial Conduct Authority before beginning to set up the product.
A senior management professional from a high street bank said implementing the Lisa would require a “reconfiguration” of its computer systems, which would take time and would not begin until the final rules were published.
Investors will not be completely disappointed, however. Hargreaves Lansdown, the UK’s biggest retail broker, has confirmed it will be launching the Lisa in April, as will the Share Centre. A handful of smaller players — including online robo-adviser Nutmeg and new microinvesting app Moneybox — also say they will offer Lifetime Isa accounts from April’s launch.
The Share Centre, one of the larger UK brokers, confirmed it would offer the product, but was concerned about how late the final guidelines would arrive.
“It feels uncomfortable to put a lot of resources into a product that is effectively still in draft form,” said Darren Cornish, director of customer experience at the Share Centre, adding: “Under the bonnet there’s a lot of complexity”.
Mr Cornish said that providers were expected to have a “digital link” to HMRC in order to provide the Lisa, allowing the tax authority to see Lisa subscriptions electronically, although all other Isas were managed “manually” through paperwork.
He added that there were questions about how providers were expected to certify a client was “terminally ill” in the event of a premature withdrawal. “We’ve never had to deal with that before,” he said.
On top of these issues, Mr Cornish said that given the Lisa was capped at an annual contribution of £4,000 and most providers would charge a percentage of the assets to manage the product, it would “not provide much revenue”.
“If you were the finance director, then you might question whether this should be prioritised,” he said. “The benefit to us is to our customers.”
In a draft paper published in November, the FCA said it wanted investors to be warned about the risks of opting out of a workplace pension in favour of a Lisa, which may cause the loss of employer contributions.
The regulator also outlined plans to warn investors about the risks of exit charges. Savers will lose the government bonus if they withdraw funds before the age of 60 for anything other that buying a first home, unless they are terminally ill.
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