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СпутникиРНSpaceXРоскосмосNASAFinance experts sounds alert with Government confirming major changes
Martin Lewis has advised adults between 18 and 39 years-old to deposit £1 into a particular type of account before time runs out. The financial expert was highlighting Lifetime Individual Savings Accounts (LISAs).
These are set to be replaced next April following the Government's announcement of a new product called a First-Time Buyer ISA (FTB ISA). However, the LISA remains accessible for now, with savers able to contribute up to £4,000 annually until they reach 50.
This is then supplemented by 25 per cent from the Government, though the funds can only be used towards a first property or accessed once you turn 60 or become terminally ill. You face a 25 per cent penalty if you withdraw funds or transfer the Lifetime ISA to another ISA type before reaching 60.
Why open one?Despite numerous critiques, Mr Lewis maintained it was still worthwhile for people to open them before they become unavailable, purely to retain the possibility of utilising it in future years. They can be established with as little as £1, reports Lancs Live.
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. That's because the LISA is a strange savings account that gives you a 25 per cent boost.
"You can put up to £4,000 a year in it and the state'll 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. But, the government is consulting on replacing it with a new First-Time Buyer's ISA. When they do, they'll close the LISA down to new applicants.
"However, if you've already got one open, even with just a quid, you can continue to use it. And 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.
"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. For example, you can no longer contribute to your workplace pension, or you're a self-employed basic-rate taxpayer, and 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."
Why are they getting rid of the LISA?Criticisms of the LISA include that it was too complicated to understand, and that wrapping up both a house-buying tool and a retirement aid in one product was never going to suit both parties.
Another problem is that the money being used to help towards a home only works if both parties are first-time buyers and the house costs less than £450,000 - a limit which had remained frozen since 2017.
That might sound like a lot of money but, with the average first-time buyer now spending £463,000 in London, that would mean the money can't be accessed without paying the 25 per cent fee. According to the BBC, in 2024/25, across the UK about 87,250 people made authorised withdrawals for a house purchase, while 129,200 made unauthorised withdrawals.
Also, the 25 per cent charge was criticised as it means it eats into the savers' contributions rather than just the extra 20 per cent contributed by the Government.
What will replace it?The FTB ISA that is set to replace the LISA has long been in the offing, but more details were released earlier this week. It will only be available for first-time buyers who are purchasing a home with a mortgage.
Savers would still get a tax-free government bonus, but it will be added to the account at the point the holder is ready to buy their first home, rather than monthly like the LISA. This means no withdrawal fees would apply.
The bonus will be based on how much they have paid in, minus any withdrawals and not on any investment growth. The North Wales Live Whatsapp community for top stories and breaking news is live now - here’s how to sign up
"Moving away from an upfront bonus should make the system simpler. Paying the bonus only when someone buys their first home removes the need to claw money back through a withdrawal charge if the savings are used in a different way," said Rachel Vahey, head of public policy at AJ Bell.
"But this simplicity comes at a cost. Savers will lose out on the investment growth they could have earned on the bonus while building up their deposit. For some first-time buyers, that could mean having less money available when they come to purchase a home."
There will also be no upper age limit on the account, and money paid in will still count towards the £20,000 annual ISA allowance. People will not be allowed to transfer cash between a LISA and a FTB ISA, but they will be able to use money from both accounts to put down a deposit on a home.
The FTB ISA will have a cash option, as well as a stocks and shares option. Transfers from a stocks and shares FTB ISA into a cash FTB ISA will not be allowed, whereas transfers the other way around will be. People will also be able to transfer money from FTB ISAs into a normal stocks and shares ISA, but not into a normal cash ISA.
The Government also confirmed earlier this week that interest paid on cash in a normal Stocks and Shares ISA will be taxed at 22 per cent fron APril 2027.
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