A Lifetime ISA account allows savers to get a 25% bonus from the government on any money they put away towards their first home or retirement – here’s how they work
Martin Lewis has explained how you can get £1,000 in free money each year to put toward buying your first home.
The help is issued through Lifetime ISA (LISA) saving accounts.
A LISA allows savers to get a 25% bonus from the government on any money they put away towards their first home or retirement.
The maximum amount you can put into a LISA is £4,000 each year – meaning a yearly bonus of up to £1,000.
But the catch is, you need to use this money on either your first property or your retirement – if you don’t, you’ll pay a penalty of 25% of the amount withdrawn.
You also have to be between the ages of 18 to 39 to open a new LISA, although you can keep saving in an existing account until your 50th birthday.
Speaking on TikTok, Martin explained how you can open a new LISA with just £1 – and recommended doing this even if you’re not ready to buy a home just yet.
The video is titled: “Why you should stick £1 in a Lifetime ISA NOW!”
Martin said: “If you’ve never owned a house, put a quid in a Lifetime ISA. Why? It gets the clock ticking.
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“The Lifetime ISA is a savings product you can put up to £4,000 a year in but when you do, the state adds 25% on top.
“If you put £4,000 in, they’ll give you £1,000 towards your first home.
“So why should you put the £1 in? Simple. You have to have it open for a year before you get the bonus.
“If you put the £1 in now, even if you’re not thinking of buying a house yet, then once you are ready to buy you’ll get the bonus instantly.”
Lifetime ISA – what do I need to know
By opening a Lifetime ISA account, you can save up to £4,000 each year and the government will add in a bonus of 25% – this means a potential £1,000 in free cash every year.
You’ll still get the bonus on smaller amounts too. So if you’re only able to save £1,000 in one year, you’d get £250 from the government.
But you only get the bonus on your contributions, not cash interest or investment growth.
You can only benefit from a LISA if you’ve never purchased a property before or you want to save for your retirement.
If you’re saving for your first home, the total property value must not exceed £450,000.
Or if you’re putting money away for your retirement, you can only withdraw your cash once you reach the age of 60.
The maximum bonus you can pocket from the government £33,000 if you open your LISA at the age of 18, and max it out until you hit 50.
This is unless you’re born on April 6, in which case the biggest bonus is £32,000.