Martin Lewis is urging people to put £1 in an account now if they’re in the right age group – because it could allow them to get a huge boost to their savings in future.
In the Budget, Chancellor Rachel Reeves announced a consultation about scrapping Lifetime ISA (LISA) accounts and replacing them with a new product instead.
The LISA allows anyone aged from 18 to 39 to put money into a tax-free savings account in order to buy their first home, with the amount being topped up with a 25% bonus. Those who don’t use it to buy a house can instead switch it to a retirement savings account they can access aged 50.
However, the LISA has come under fire for withdrawal penalties, especially as the cap on house purchases hasn’t kept up with house price inflation.
On The Martin Lewis Money Show Live on ITV1 and ITVx on Tuesday, December 2, the money expert fielded a question about LISAs in the wake of the changes being announced.
There, he urged people in a similar age bracket to open a LISA with £1 now, just in case they may need it in the future.
An audience member aged in his ‘early 30s’ who already owned his own house asked Martin: “Is it still worth me continuing to add to my Lifetime ISA given the speculation about it changing soon.”
Martin then told him: “So the only reason you’d do it is for retirement savings because you can’t get the bonus twice.”
Martin then checked that he was a PAYE employee who is already maxing out his pension before adding: “It’s better than saving in a normal savings account because you get a 25% bonus on top.
“I think what I’d say to you is we’re in a limbo stage. I think it would be unthinkable for them to close the Lifetime ISA and not give you the bonus aged 50. I think the worst is they’d stop you putting any more money in.
“So, what I would say, funny I’ve just thought of this as I’m talking now, what I’d say to anybody of this age, even if you’ve bought a house and you haven’t got a Lifetime ISA, put £1 in one now, just in case they do close it down and later you wanted to use it for retirement. You’ve got that facility.
“But I’d probably, and the Chancellor would hate me saying it, I’d sort of be in limbo at the moment and wait and see what happens in that consultation before I put too much more money in, because we don’t know where we’re going.
“But my guess is they’ll keep it open for people like you who’ve opened one, but not allow anybody new to have the same situation that you’ve got.”
Commenting on the news of the consultation on LISAs, Carol Knight, CEO of The Investing and Saving Alliance, said: “This is a moment for sensible reform of the Lifetime ISA, not a rush to scrap it. LISAs have helped a generation of first-time buyers save for a deposit and, crucially, given many – particularly the self-employed – a simple, engaging way to build retirement savings.
“As the government consults on a new ISA for homebuyers, it must protect the strengths of the LISA and give clarity and fair treatment to existing savers – not dismantle a product that is already delivering for those trying to save for both a first home and later life.”