Unity Mutual launches new type of Lifetime ISA - MSE News

Unity Mutual has launched a new type of stocks and shares Lifetime ISA, offering a guaranteed 1.25% interest rate until April, as well as a 25% Government bonus towards your first home or retirement - here's what to watch out for...
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'Unity Mutual launches new type of Lifetime ISA'
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  • Alexland
    Alexland Posts: 9,653 Forumite
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    I guess getting a guaranteed interest rate each tax year based on expected property rental yields is reasonably attractive and this is now the best paying guaranteed return LISA in the market.

    Someone I know at work is buying a property and cashing in their Share Centre S&S LISA with a small investment loss - at the time last year I did mention that S&S is not suitable for short term so my conscience is clear.

    Alex
  • how safe is this? i'm not sure.

    unity mutual guarantee a 1.25% return (until 5 april 2019, after which they'll tell you what level of return they're guaranteeing for the next year).

    but a guarantee is only as good as the person who makes it. what if they are unable to honour that guarantee? they say it is covered by the FSCS - as an investment product, not as a deposit - and you "may" be entitle to compensation. but is this the kind of thing the FSCS actually covers, or it is a normal loss on an at-risk investment, which wouldn't be covered?

    apart from that guarantee from unity mutual, they say that "the Account will hold a Unity Mutual life policy, which invests in a Unity Mutual Property Saver Fund". they also say that the underlying investments can include "cash, government bonds, corporate bonds, equities, property and other assets that we might deem appropriate from time to time". those underlying investments could lose money, so unity mutual's guarantee (and whether the FSCS would really back it up) does matter.
  • masonic
    masonic Posts: 23,247 Forumite
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    edited 7 November 2018 at 9:06PM
    but a guarantee is only as good as the person who makes it. what if they are unable to honour that guarantee? they say it is covered by the FSCS - as an investment product, not as a deposit - and you "may" be entitle to compensation. but is this the kind of thing the FSCS actually covers, or it is a normal loss on an at-risk investment, which wouldn't be covered?

    apart from that guarantee from unity mutual, they say that "the Account will hold a Unity Mutual life policy, which invests in a Unity Mutual Property Saver Fund". they also say that the underlying investments can include "cash, government bonds, corporate bonds, equities, property and other assets that we might deem appropriate from time to time". those underlying investments could lose money, so unity mutual's guarantee (and whether the FSCS would really back it up) does matter.
    At face value, it would appear Unity Mutual has an obligation to repay your capital and this can be satisfied through FSCS compensation. It needs some due diligence though, as this is an unusual arrangement. This appears to be an investment life policy, which has unlimited FSCS protection within a SIPP, but there is currently no available information on the FSCS website as to what protections would be in place if this product was held within a LISA.

    It is a shame that the first thing that came to mind when I saw "Unity Mutual" was "DotComUnity", the twice failed credit union who had a market-leading ISA product before becoming insolvent and locking up savers' money for several months while the PRA took enforcement action and decided what to do with it. No connection with this firm, I'm sure, but it would be rather inconvenient if history repeated with a product where inability to make a time-sensitive withdrawal might cost a FTB dearly.
  • Brilliant, an already complex product made more complex. Just what the market needs!
  • Alexland
    Alexland Posts: 9,653 Forumite
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    Wildsound wrote: »
    Brilliant, an already complex product made more complex. Just what the market needs!

    I am waiting for the LISA where you can only make a penalty free withdrawal using a Nokia 3210.
  • Herbalus
    Herbalus Posts: 2,634 Forumite
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    This is an unusual product.

    You can ignore the behind-the-scenes investments as if they guarantee 1.25% plus return of capital (so long as they can fulfil that) then that's all that matters to the end user. But if they invest your savings and then the stock market plummets they will be looking at a loss.

    Potentially not wise from the company's point of view which makes me uneasy.
  • aj23_2
    aj23_2 Posts: 1,155 Forumite
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    Worth sticking with Skipton then?
  • Alexland
    Alexland Posts: 9,653 Forumite
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    aj23 wrote: »
    Worth sticking with Skipton then?

    These interest rate differences are so marginal that it's not worth the effort transfering an existing cash LISA even if the new provider is accepting transfers. Skipton seem competent at managing the product and when buying property the value of working with people that are clued up should not be underestimated.

    Alex
  • aj23_2
    aj23_2 Posts: 1,155 Forumite
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    Alexland wrote: »
    These interest rate differences are so marginal that it's not worth the effort transfering an existing cash LISA even if the new provider is accepting transfers. Skipton seem competent at managing the product and when buying property the value of working with people that are clued up should not be underestimated.

    Alex


    On my balance it's worth an extra £40 as it stands. I meant more with it being an investment rather than a holding. I won't switch it though.
  • masonic
    masonic Posts: 23,247 Forumite
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    aj23 wrote: »
    I meant more with it being an investment rather than a holding.
    IMHO this is a big red flag. It's not clear at all what the process and timescales would be if the underlying investments went south and the counterparty (Unity Mutual) struggled to meet its obligations.
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