MARTIN Lewis has urged Brits under the age of 40 to make the most of a yearly £1,000 government bonus.
The cash is available through the Lifetime Isa (Lisa), which pays a bonus if you use the savings towards your first home or retirement.
Writing in his weekly MoneySavingExpert newsletter, Martin said: "If you hope to buy your first home in the next 10 years, put £1 in a Lisa now.
"Lifetime Isas give first-time buyers a 25% bonus (up to £1,000/year) on their savings, but only after it's been open a year.
"So open one with £1 now, to start the clock, so it's usable if/when needed."
Lisa accounts are open to anyone aged 18 to 39 and you can keep saving in one until you are 50-years-old.
Best Cash Lifetime Isas (Lisa)
If you opt for a cash Lisa, you’ll want to shop around to get the best interest rate you can find.
- Moneybox – Apply here
Interest rate: 0.85%
- Nottingham Building Society – Apply here
Interest rate: 0.80%
- Paragon Bank – Apply here
Interest rate: 0.50%
- Newcastle Building Society – Apply Here
Interest rate: 0.35%
- Skipton Building Society – Apply here
Interest rate: 0.10%
You can save up to £4,000 each tax year and the government will then add a 25% bonus, effectively giving you free money.
For example, if you save £1,000 a year, the government will add in £250, and if you save the full £4,000 you'll get an extra £1,000 on top.
If you opened a Lisa at age 18 and saved the maximum amount for 32 years you'd get £32,000 of free government cash.
The £4,000 savings limit counts towards your overall Isa cap, which is £20,000 for 2020/2021.
With the current tax year set to end next month on April 5, it could be worth setting up an account.
With a Lisa, you can buy homes worth up to £450,000 in London and £250,000 outside London.
However, you'll be charged a 20% fee of the amount withdrawn – including the bonus – if you want to use it for something other than its specific purposes or if you buy a home above the threshold.
This penalty was cut from 25% due to the pandemic, but it's set to revert back to 25% from April 5.
The reduction effectively means that while you lose out on the bonus, you'll currently get back your own savings.
You can check out MoneySavingExpert's Lisa guide for more information.
One Sun reader has explained how they used the scheme to buy their first home.
It comes after the government pulled the Help to Buy scheme in favour of the Lifetime Isa.
If you do decide to use the government top-up on your Lisa to buy a house, you won't be able to get it again when you come to retire.
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