Martin Lewis has shared another savings tip ahead of the new tax year, and people need just £1 to get started.
Speaking at this year’s Ideal Home Show, the Money Saving Expert founder said: “Anyone aged 18 to 30, open up a lifetime ISA and get at least £1 in this. The reason being that you need to have a lifetime ISA open for a year before you can get the bonus.
“When you eventually want to put money in, this won’t be a problem – but get at least £1 in this now.
“If you don’t ever use it, you lose 6.25 percent to take the money out, so you’d lose 6.2 pence, and I would say it’s worth the risk really.
“If you’re looking at savings, you want something strong interest.”
A Cash Lifetime ISA (LISA) is an individual savings account designed to help people save for their first home or retirement faster.
People can save up to £4,000 a year in a lifetime ISA, after which the Government will add a 25 percent bonus of up to £1,000 to the savings.
Withdrawals can only be made to purchase a qualifying first house up to the value of £450,000, or for retirement after the age of 60. The LISA also must be open for at least 12 months before any withdrawals are made.
If withdrawals are made for any other reason, a 25 percent Government penalty is applied.
This is an important factor to consider when opening an account of this kind as depending on how much has been invested, it could mean people get back less than they put in.
Moving on to Cash ISAs more generally, Mr Lewis told visitors: “For many years, I used to say that money is nicer in cash ISA. Then I stopped saying it because, in 2016, the personal savings allowance was introduced.
“This says that if you are a basic rate taxpayer, you can earn £1,000 of interest in any savings account of tax-free cash each year. And what that means for most people, is that they weren’t paying tax on savings.
“This was the situation for a long time and the fact that normal savings pay more than cash ISAs. And then it all changed because interest rates went up.
“So right now, the top easy access savings accounts pay around five percent interest, what does that mean to earn £1,000 of interest? You need £20,000.”
However, Mr Lewis noted: “If you’re a higher rate taxpayer, then your interest will be taxable and a cash ISA now comes into play.”
Click here to see the top savings accounts and ISAs this week paying interest rates up to seven percent.
Martin Lewis was speaking at the Ideal Home Show at Olympia London, which runs from Friday, March 22, to Sunday, April 7. Find out more at www.idealhomeshow.co.uk
