A Lifetime ISA (LISA) offers a 25 percent bonus from the government on savings – up to a maximum of £1,000 per year. It may be that a person opts to save in a LISA in order to save for a mortgage deposit, or perhaps for their retirement savings, as Martin Lewis explained last night.
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In addition to the 25 percent bonus, some people may look for an account with a bank or building society which also offers annual interest rates on the savings.
During the Martin Lewis Money Show, Mr Lewis was asked “where’s the best place to get a LISA”.
“The top paying cash Lifetime ISA is Moneybox at 1.4 percent,” he replied.
The financial journalist went on to explain that there is another option when it comes to these types of accounts – and these are investment Lifetime ISAs, in which a person can hold stocks and shares.
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Martin Lewis spoke about mortgages and Lifetime ISA savings on the Martin Lewis Money Show (Image: GETTY • ITV)
“There are also investment LISAs, but I wouldn’t tend to use those as a first-time buyer,” he said.
“They’re usually more for people who are saving for their retirement in a LISA, but I’m not the biggest fan of that.
“For most people, I’d stick with a pension.”
It’s possible to save up to £4,000 each year into a Lifetime ISA – until a person reaches the age of 50.
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This £4,000 limit counts towards the annual ISA limit.
In the 2019 to 2020 tax year, this is £20,000.
The tax year is set to end in a matter of months – on April 5, 2020.
Once the saver reaches their 50th birthday, they will not be able to pay into their Lifetime ISA or earn the 25 percent bonus.
Martin Lewis was asked where savers could find the best top paying Lifetime ISA at the moment (Image: GETTY)
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That said, the account will stay open and the savings will still earn interest or investment returns.
It’s possible to withdraw money from a Lifetime ISA without charge should it be for a number of reasons.
These are if it’s because the saver is buying their first home, aged 60 or over, or terminally ill, with less than 12 months to live.
Otherwise, the saver would pay a 25 percent charge if they withdraw cash or assets for any other reason.
Martin Lewis spoke about mortgages and saving via Help to Buy and Lifetime ISAs last night (Image: GETTY)
If the money is being saved to help to buy the saver’s first home, a Lifetime ISA can be used if all of the following conditions apply.
The property costs £450,000 or lessThe purchaser buys the property at least 12 months after opening the Lifetime ISAThey use a conveyancer or solicitor to act for them in the purchase – the ISA provider will pay the funds directly to themThey’re buying with a mortgage.
The Martin Lewis Money Show continues on Monday at 8pm on ITV.