A simple £1 deposit today could prove enormously worthwhile in years to come, according to Martin Lewis. The Money Saving Expert believes anyone aged between 18 and 39 should consider acting promptly amid growing uncertainty surrounding the future of Lifetime ISAs.
Appearing on an episode of ITV’s This Morning this week, Lewis encouraged all those eligible for a Lifetime ISA (LISA) to open one with a minimal deposit. He pointed out that certain providers, including Moneybox and Plum, permit customers to open an account with as little as £1.
Lewis said: “Aged 18 to 39, if you don’t have a Lifetime ISA, put a quid in it. You need to do more reading whether you should be actually using it and putting real money in, but the big warning, one pound. I want everyone aged 18 to 39 to have one pound in a Lifetime ISA so that if it becomes useful to you in future when you can no longer open it, you have the facility.”
The advice follows the government’s launch of a review into the UK’s ISA framework, fuelling speculation about whether Lifetime ISAs could face reform going forward. Lewis said the current rules could change “sometime next year”, meaning those who delay may forfeit the opportunity to open an account should eligibility criteria be revised.
According to GOV.UK, only those aged between 18 and 39 are permitted to open a Lifetime ISA. Once established, contributions can continue until the age of 50, provided the account was created while the holder met the eligibility requirements.
According to GOV.UK, savers can contribute up to £4,000 per tax year and receive a 25 per cent government bonus, worth as much as £1,000 annually. The funds can be put towards purchasing a first home valued at up to £450,000 or withdrawn once the account holder reaches 60.
Withdrawals are also permitted in cases of terminal illness. However, GOV.UK cautions that accessing funds for any other purpose typically incurs a 25 per cent withdrawal penalty, meaning savers could ultimately receive less than their original contributions.
Lewis addressed this during the interview, noting that someone opening an account with just £1 would only risk losing approximately 6.25p should they subsequently choose to withdraw. He suggested this was a negligible cost for securing access to the account in case it proved beneficial down the line.
He further drew attention to another significant advantage of opening a Lifetime ISA sooner rather than later. To be eligible for the Government bonus when purchasing a first home, the account must have been active for a minimum of 12 months.
Lewis said: “To use a Lifetime ISA on a first-time property, it has to be open a year. So if you put a quid in now and you suddenly decide you’re buying a house next year, you could then put four grand in and you get the £1,000 bonus.
“But if you only started to open it next year, you couldn’t do that. So there’s another reason for having money in there.”