Martin Lewis has issued new savings advice for everyone born between 1987 and 2008. In a recent video, the Money Saving Expert (MSE) founder urged those aged between 18 and 39 to take advantage of a scheme to help them get on the property ladder — and to do it sooner rather than later.
He advised anyone within this age group, whether they already own a home or plan to get on the ladder in future, to put £1 in a Lifetime ISA (LISA) account 'now', both to reap the rewards it offers and avoid missing out before it's replaced.
New First Time Buyer ISA to replace LISA
A new First Time Buyer ISA is set to launch from April 6, 2029, meaning LISAs will close to new applicants. However, Martin explains that 'as long as you've opened one before then, you can still use and get the benefits on the Lifetime ISA after that.'
The government-backed scheme gives savers 25% extra on deposits of up to £4,000 a year, tax-free, as long as it's used for retirement or the purchase of a first home. The bonus — which adds up to a maximum of £1,000 for each year you have it, and can be put towards properties priced up to £450,000 — is only payable after a year, but you don't have to put the full amount in straight away to receive it.
How the LISA rules work
Savers can also put money into a LISA until they turn 50 and withdraw without penalty after age 60, but need to make their first payment before reaching 40 years old to receive bonuses.
Martin says: 'One reason for putting a pound in as soon as possible is you get that clock ticking; tick tock, tick tock.'
'Even if you're not ready to buy now, as long as it's more than a year away, once you are, then you can just dump the £4,000 in and you get the £1,000 bonus straight away.'
If you open your account with just £1 then don't use it to pay for a home or retirement, you only risk losing 6p. And according to the financial guru, if that's the worst that happens, it's 'worth it' to have the option should you want it further down the line.
Penalty fee reduced to 20%
Alongside plans for its replacement, this Budget also saw changes announced for one of the most contentious elements of the Lifetime ISA; the £450,000 limit. MSE has long campaigned against the 25% penalty issued to LISA savers who accessed the money to buy property worth more than this, a figure which has remained the same since the scheme's introduction almost 10 years ago.
A decade on, however, chancellor John Healey has now dropped the fee to 20%, which Martin says makes it 'far less of a gamble'.
'Now, if you're buying a property over £45,000, you won't face a penalty to get your money out for the deposit,' he explains. 'You won't get the bonus, but you'll get back what you put in, plus interest. So, the risk of having a Lifetime ISA is less.'
