Tonight’s episode of the Martin Lewis Money Show covered a whole range of topics which included underclaimed Department for Work and Pensions (DWP) benefits, Ofgem’s energy price cap, and how you can get a free cash towards your first home
Martin Lewis shares one saving trick which can give you a free £1,000 cash payment to go towards your first home.
The Money Saving Expert (MSE) founder returned to screens tonight for a new episode of the Martin Lewis Money Show. Tonight’s episode of the ITV show covered a whole range of topics rather than just the one which included underclaimed Department for Work and Pensions (DWP) benefits, Ofgem’s energy price cap, and how you can get free cash towards your first home.
On the show, Martin was asked where the best place for someone aged 18 to save money towards a house deposit was. In response, Martin said “without any doubt” the first place to look was the Lifetime ISA savings account.
Martin explained that the Lifetime ISA or LISA is a tax-free savings account in which the government gives you a 25% bonus on your savings. He added: “People can open a LISA on the day of their 18th birthday, and they can open one until the day before their 40th birthday. That is the very last time they can open one, and once it’s open, it stays open.
“When you can open it, it gives you a 25% boost on what you put in. So if you put in £1,000 in one month, the state will add £250 pounds that month, and that will be sitting in your lifetime ISA account. That amount will get interest on top of it as well, and it will keep doing that until you’re age 50. As they have been around since 2017, the oldest people with LISA’s are 46, so we’ve not yet hit it, so they’re still getting that 25% contribution.”
“The most you can put in per tax year is £4,000, which means you can get up to £1,000 free per year, and you get that each year. So if you had it for 10 years, you would have £10,000 free from the state.”
However, Martin warned that there were some “caveats” with the LISA. The first was that if you withdraw your cash for for any reason other than your first home or retirement, you’ll be slapped with a 25% withdrawal penalty, which not only wipes out the bonus but also part of your original savings.
He explained: “Now, you might think you’ve got a 25% bonus on the 25% off which means you come out with the amount that you put in. That’s not the case, if you have £10,000, you will have £12,500 with the bonus, but if you take it out, you end up with £9,075. So you put ten grand in but end up with £9,075 because of the penalty.”
Alongside this, Martin highlighted other key points you need to be aware of when opening a LISA. If you’re planning on using it to purchase a property, your new home can’t be worth more than £450,000, which Martin says can become an issue, particularly if you live in London.
Alongside this, Martin warned that you are only eligible for the bonus if you have had the LISA for over one year. So it was “important” for young people to open them sooner rather than later. He added: “If you’re aged between 18 and 39 and you’ve not got a LISA and you haven’t bought a property, go and put £1 in one. Even if you don’t want to save for a first property.
“Why? Because the clock is ticking, when you are ready to put money in, you could put £4,000 in and get £1000 straight away. Parents of people aged 18, 19 or 20 go and give them a £1, they will still take it, and tell them to open a LISA because it will then be there, ready and waiting.”
