One in three adults under the age of 40 are saving to buy their first home and get a foot on the property ladder, but research from Cushon has found that less than half (44.1%) are taking advantage of top up bonuses offered by the government.
The workplace savings and investment provider revealed that of those saving to buy their first home, only 13.2% are saving into a Lifetime ISA, while 30.9% are putting money into a Help to Buy ISA – the Lifetime ISA’s predecessor.
Cushon suggested its findings, based on a survey amongst 2,000 people, mean there are many aspiring homeowners missing out on ‘free money’ of up to £1,000 a year offered with a Lifetime ISA.
Of those surveyed who are saving to get onto the property ladder, 31.8% indicated they are saving into an instant access account, while 25.5% said they are saving into a fixed rate savings account. One in five (20.5%) are saving into a cash ISA while another 7.7% are saving into a stocks and shares ISA.
With interest rates at an “all time low”, however, Cushon suggested a Lifetime ISA would help these savers get onto the housing ladder quicker.
The Help to Buy ISA was closed to new applicants in November 2019 but the Lifetime ISA currently offers a 25% government top up bonus up to £1,000 per year on any savings, as long as the money is used to purchase a first home or for retirement.
“The Lifetime ISA is not getting the traction that it should,” commented Cushon head of proposition, Steve Watson.
“With a 25% government bonus it is the ‘no brainer’ product for the under 40s looking to get on the housing ladder and could really speed up the reality of purchasing a home for a lot of young people.
“I think it’s the name that’s the issue – it just doesn’t resonate with the target market. The Help to Buy ISA does what it says on the tin, but the Lifetime ISA is ambiguous at best and more education and product awareness is desperately needed. With interest rates at an all time low, there is no need to shop around, with the government 25% top-up, a Lifetime ISA blows any interest rate out the water.”
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