Martin Lewis has issued new savings advice for everyone born between 1986 and 2007.
In the latest issue of his podcast, 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 who wants to buy a house to put £1 in a Lifetime ISA (LISA) account ‘ASAP’, both to reap the rewards it offers and ensure they don’t miss out due to a cut-off.
The government-backed scheme gives first time buyers 25% extra on savings of up to £4,000 a year in the tax-free account.
While the bonus – which adds up to a maximum of £1,000 for each year you have it, and can be spent on properties priced up to £450,000 – is only payable after a year, you don’t have to put the full amount in straight away to receive it.
Savers can also put money into a LISA until they turn 50, but need to make their first payment before reaching 40 years old to receive bonuses.
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Martin explains: ‘Just putting a pound in now even if you’re not ready to use it means when you are ready to use it the clock will have been ticking.
‘You would have had it open a year. So you’re perfectly eligible to suddenly go and get the bonus when you want.
‘In fact, parents, on your kid’s 18th birthday, why not get them a LISA and put a pound in it?’
Although you’ll pay a 6.25% penalty for withdrawing the money in your LISA rather than using it to pay for a home purchase, if you open yours with just £1 you only risk losing 6p.
And if that’s the worst that happens, the financial guru thinks it’s ‘worth it,’ to give yourself the option should you want it further down the line.
Big brands like HSBC, Natwest and Halifax all offer Lifetime ISA accounts, each with their own interest rates but all qualifying for the government bonus.
Despite endorsing the scheme though, Martin has been a strident campaigner for the £450,000 limit (which has remained the same since) to be raised, most recently as part of a new government report on LISA reform.
He told the Treasury Select Committee: ‘We have a succession of young people who are saving in the vehicle they have been encouraged to save in by the state, who are then trying to use their savings to buy a first-time property, but due to house price inflation their property has just tripped above the £450,000 level.
‘Then not only do they not get the £1,000 a year bonus they were intended to get – which I understand is legitimate as a threshold – but they are fined by the state effectively 6.25% of their own money in order to withdraw that money to get the cash out.’
In response to Martin’s comments, the Committee agreed the LISA may not be ‘working as intended’, highlighting HMRC stats which reveal that £213 million in withdrawal charges was taken from more than 286,000 savers in the six tax years to 2023-24 — an average of over £3,000 per person.
The report made recommendations to Chancellor Rachel Reeves ahead of plans to ‘imminently’ update the system, with a Treasury spokesperson claiming it would now ‘review its findings and respond in due course.’
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