Lifetime ISAs (LISAs) have missed their first-year government target. However, this was not due to lack of demand among target consumers. To increase sign up, building societies must use their branch network to their advantage to enable customers to apply for an ISA, what is commonly perceived as a complex product.
LISAs are available for 18–39 year olds (Generation Z and millennials). The product offers consumers a 25% government bonus on savings of up to £4,000 a year, but the money can only be used for consumers to buy their first home or for their retirement. If savers need to take out money from their LISA for any other reasons there is a 25% penalty. The government set a target of 200,000 LISAs opened in the first 12 months, yet figures from HMRC show that only 166,000 were opened.
On paper, these results could suggest that the target audience are not interested in saving. However, GlobalData’s 2019 Banking and Payments Survey shows that 62% of Generation Z and 60% of millennials prioritise “saving for the future” than “living well now.” In addition, HMRC data shows that the average saved in LISAs is £3,114 per account – more than three quarters of the £4,000 government limit. This illustrates that those who have the product are serious about medium- to long-term saving and that the incentives LISAs provides are attractive.
Building societies trying to give you an ISA
Rather than a lack of demand, one barrier to uptake could be the complexity of the product. Some MPs have called for the scheme to be scrapped altogether due to its complexity, and leading building society Nationwide has shunned LISAs for the same reason.
Yet there are ways to tackle this issue. Building societies should be using their branch network to their advantage, both to offer advice to customers when opening an ISA or LISAs and to cross-sell the product. Currently the likes of Skipton and Newcastle Building Society only let users open LISAs online. Nottingham Building Society is an example of a company bucking this trend, as it allows users to apply both in-branch and online. Allowing consumers to open LISAs in-branch means they can be offered the expert advice they may need when deciding whether or not to open one.
In GlobalData’s aforementioned survey, half of Generation Z and over a third of millennials prefer seeking “expert advice” rather than “doing it themselves.” Building societies that solely rely upon digital applications for LISAs could be underperforming because of this.
While LISAs missed their first-year government target, this is not because the target demographic does not want to save for the future. Building societies should use their multi-channel advantage over their digital-only competitors by enabling customers to open LISAs with branches.
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