Martin Lewis issues ‘important warning’ to Brits aged 18 to 39 | Personal Finance | Finance
The Government is planning to replace the savings account (Image: Ken McKay/ITV/Shutterstock)
Money saving expert Martin Lewis has urged those aged between 18 and 39 to make one simple move now, warning it could preserve access to a valuable savings product before Government changes come into force. In a video shared on social media, the founder of MoneySavingExpert.com said people who do not already have a Lifetime ISA (LISA) should consider opening one with as little as £1.
Mr Lewis explained that while the Government is consulting on reforms to ISAs, opening a LISA now could ensure savers retain access to the account even if it is closed to new applicants in future.
Mr Lewis said: “This is an important warning for anybody aged 18 to 39. If you do not have a Lifetime ISA, get a pound in one now.”
He added: “That’s because the LISA is a strange savings account that gives you a 25% boost. You can put up to £4,000 a year in it and the state will add a grand, either to use towards your first property as long as it costs under £450,000, or to use towards retirement savings once you’re age 60.”
However, Mr Lewis warned that the current Lifetime ISA may not remain open to new savers if ministers press ahead with proposed reforms.
“But the Government is consulting on replacing it with a new first-time buyers ISA,” he explained. “When they do, they’ll close the ISA down to new applicants.”
He added that people who already have a LISA open – even if it contains only £1 – would still be able to continue using it.
“However, if you’ve already got one open, even with just a quid, you can continue to use it,” Mr Lewis said.
He also highlighted another potential advantage if the proposals go ahead: “That’s important because what they’re suggesting is for first-time buyers you’ll be able to get the bonus on a LISA and the new first-time buyer ISA. And for retirement savings, there won’t be any equivalent.”
Savers can contribute up to £4,000 each tax year, with the Government adding a 25% bonus worth up to £1,000 (Image: Getty)
Who can open a Lifetime ISA?
A Lifetime ISA can currently be opened by anyone aged between 18 and 39. Savers can contribute up to £4,000 each tax year, with the Government adding a 25% bonus worth up to £1,000 annually. The money can be used either towards buying a first home worth up to £450,000 or withdrawn from the age of 60 for retirement. Withdrawals for other reasons usually incur a Government withdrawal charge unless an exception applies.
Mr Lewis stressed that while a LISA is not usually the best option for retirement savings compared with a workplace pension, there are circumstances where it can be particularly useful.
“Now the LISA for retirement savings isn’t normally as good as a workplace pension, but there are certain circumstances where it can be good,” he said. “For example, you can no longer contribute to your workplace pension or you’re a self-employed basic rate taxpayer.”
He finished by explaining why opening an account now could provide flexibility in the future: “We don’t know what you’ll be in 10 years’ time, but putting a pound in now means you’ll have the facility to use it in 10 years’ time if you need it.”
