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The savings and investing platform Plum* has hiked the rate on its cash Lifetime Isa to 5.51 per cent, making it one of the top rates available on any savings account.

The catch is that the rate includes a 2.4 per cent boost for 12 months, after which it plummets to 3.11 per cent variable.

The increase sees Plum locked in a rate battle with rival platform Moneybox, which earlier this week upped the rate on its own Lifetime Isa to 5.3 per cent.

Moneybox’s option includes a 12-month boost at 2.5 per cent – making the underlying rate slightly lower than Plum’s at 2.8 per cent.

If you take up one of these deals, you may want to compare your options after the year is up and transfer to an account paying higher interest.

The Government has confirmed it will introduce a new account for first-time buyers to replace the Lifetime Isa (Lisa). 

However, no further details have been announced and it remains possible to open and pay into the product, so it’s still worth considering opening an account especially if you’re saving to buy your first home.

Plum* is offering the better rate, but it pays a lower 4.01 per cent variable – including a 0.9 per cent 12-month boost – on transfers.

Moneybox is paying the same 5.3 per cent rate on transfers too, so is likely the better option if you’re looking to shift your savings from elsewhere.

The best rate on a regular easy-access cash Isa is currently offered by Trading 212* at 4.76 per cent, which includes a 1.16 per cent 12-month boost.

With Lifetime Isa rates now far above that best-buy option, it’s worth opening one if you’re saving for a first home and don’t have one already.

A Lifetime Isa can help you save for a deposit quicker. You can squirrel away up to £4,000 a year into the account, which the Government tops up by 25 per cent.

This means a free £1,000 if you save the maximum each year.

Keep in mind that the £4,000 allowance forms part of your overall Isa allowance of £20,000, so contributing the top level gives you £16,000 to stash into other Isas such as cash and stocks and shares.

However there’s a controversial £450,000 cap on the maximum price of the property you can use a Lifetime Isa for, which hasn’t been reviewed since the account was introduced. 

If you use the funds to buy a home worth more than that, or withdraw them for a reason other than buying a home or after the age of 60, you will lose the Government bonus you have been paid as well as some of your own cash. 

Lifetime Isas are also intended to incentivise people saving for retirement and could be particularly beneficial for the self-employed, who aren’t auto enrolled into a pension.

Lifetime Isas are only available to open for those aged between 18 and 39 and you can’t save into one beyond the age of 50. The funds are only accessible without penalty when you buy your first home or after you reach 60.

You can read more about the rules in our guide to Lifetime Isas.

The Government has confirmed it will introduce a new account for first-time buyers that will replace the Lifetime Isa, but this won't launch until 2028 at the earliest.

Moneybox has been a staunch champion of Lifetime Isas and recently urged the Chancellor, Rachel Reeves, to reform rather than replace the scheme completely.

Under the existing proposals, the replacement product won’t include an incentive for those saving for retirement – which Moneybox has highlighted as a particular problem.

According to the provider, 15 million Britons aren’t saving enough for later life and only 36 per cent of the self-employed are on track to retire with enough savings.

Moneybox has called on the Chancellor to keep the product, commit to an annual review of the property purchase price cap, and reduce the withdrawal penalty to 20 rather than 25 per cent.

The self-employed can save into a pension using a self-invested personal pension (Sipps). We have a guide to the best Sipps, reviewing the top investment platforms and who they might be suited to.