An estimated 28,000 individuals have taken out cash Lifetime ISAs with Skipton Building Society – the only provider currently offering a cash version of the product.
It revealed that the new cash Lifetime ISA is proving to be popular with younger savers in particular: 51% of accounts have been opened by individuals under the age of 30.
Introduced in April, the Lifetime ISA allows savers under the age of 40 to deposit up to £4,000 each tax year. They will then receive a 25% bonus from the government on any savings put into the account before their 50th birthday.
The tax-free savings and the government bonus can be put towards a deposit for a first home in the UK, or can be withdrawn from the age of 60 for retirement purposes.
Skipton Building Society’s cash Lifetime ISA currently offers a rate of 0.5%.
Kris Brewster, Head of Products at the building society, said: ‘We believe the Lifetime ISA could make a real difference to a new generation of savers, not only in helping them get a foot on the property ladder but providing them with another option to help them save for their future too.’
Other providers offer stocks and shares versions of the Lifetime ISA. However, some have chosen not to offer the product due to its complicated rules.
The first cash-only Lifetime ISA is being launched this week, allowing adults under the age of 40 to put aside cash sums in order to save for their first home or their future retirement.
The Lifetime ISA was introduced in April, but initially only share-based investments were available. The Skipton Building Society is now offering the first cash Lifetime ISA, with an interest rate of 0.5%.
Under the scheme, savers aged between 18 and 39 can invest up to £4,000 a year and will receive a 25% bonus on contributions from the government up until their 50th birthday.
Funds can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from the age of 60, tax-free.
The savings and bonus can be used towards a deposit on a first home worth up to £450,000.
However, where the funds are withdrawn before the age of 60 the account holder will lose the government bonus (plus any interest or growth on this) and will be liable to pay a 5% surcharge.
Pension providers and banks are urging the Government to delay the April 2017 launch of the new Lifetime ISA, warning that they will not be ready to offer the savings product by this time.
The Lifetime ISA was announced in the 2016 Budget by the former Chancellor, George Osborne.
It will offer Government-backed support to first-time home buyers and seeks to encourage those aged under 40 to begin saving for retirement.
Pension providers Aegon and Standard Life have stated that they have delayed their plans until final details regarding the Lifetime ISA are released.
The Financial Conduct Authority (FCA) is yet to consult on the initiative. Steven Cameron, Pensions Director at Aegon, stated that a consultation is ‘likely to take three months’ to carry out.
Meanwhile, a spokesperson for Standard Life said: ‘As we want the Lifetime ISA to be a success, we would prefer that its launch is delayed until providers receive more detail on the product and how it is to be implemented.’
The Treasury said that full details would be confirmed in the autumn.