Paragon Bank has launched a new Cash Lifetime ISA (LISA) to introduce new competition to the LISA market. Paragon said that their new LISA can be opened by anyone between the ages of 18 and 39 – allowing customers to save up to £4,000 a year tax-free and receive a 25% government bonus until they turn 50.
If savers are willing to lock their cash up for longer, Paragon said they can earn more – as funds cannot be withdrawn without being subject to a 25% government charge, unless they are to be used for the purchase of a first home, or for retirement. If used for retirement, the funds can be withdrawn free of charge once the account holder reaches the age of 60. However the savings will stop earning the 25% government bonus and cannot be added to after the account holder has turned 50.
Paragon savings director, Derek Sprawling, commented, “The LISA is a fantastic opportunity for savers to earn a considerable amount of money on their savings towards their first home or retirement. “If you save the maximum amount into a LISA every year between 18 and 50, you will have earned a £32,000 government bonus alone. “The imminent end of the Help to Buy ISA should increase the appeal of the LISA scheme.”
Paragon’s launch comes just days before Help to Buy ISAs are due to close to new savers, and it’s the first new lifetime ISA account to open in just over four months. But the competition is still limited – with just 14 products in total across cash and stocks & shares options. The Paragon Bank Lifetime Isa measures up to rival offerings from Skipton, Nottingham and Newcastle Building Society and Moneybox.
What does the Paragon Bank cash lifetime ISA offer?
It accepts transfers from other lifetime ISAs, and there are no additional account fees. Up to £85,000 of your savings will be covered by the Financial Services Compensation Scheme (FSCS) in case the bank goes bust. This is something to keep an eye on, as if you make the maximum deposit every year, you will exceed this limit in 17 years when you factor in the maximum amount you can save plus the government bonuses – and this is before interest.
How does the new lifetime ISA compare?
Paragon’s new lifetime ISA account brings the total to 14: five cash lifetime ISAs, and nine stocks and shares lifetime ISAs. Paragon Bank’s Lifetime ISA account offers the third-best AER rate. There’s little variation between the accounts, though, so it only falls short of the Moneybox leading rate by 0.25%.
The Paragon account also accepts transfers from other lifetime ISAs. While this feature was set out in the government’s initial lifetime ISA proposal, to make sure savers can switch between products, not all accounts accept transfers. Nutmeg, OneFamily and Hargreaves Lansdown don’t accept lifetime ISA transfers, while the Nottingham Building Society doesn’t accept transfers from any kind of ISA.