Money-saving guru Martin Lewis has unveiled what he claims is a “no-brainer” financial move for first-time buyers – and surprisingly, retirees too.
In the latest episode of his Everything You Need to Know About ISAs podcast on the BBC, the MoneySavingExpert founder urged anyone aged 18 to 40 to open a Lifetime ISA (LISA) and put in just £1 – a tip he says could open the door to a hefty government bonus.
How the LISA bonus system works:
You can pay up to £4,000 a year into a LISA, and the government adds a 25% bonus – up to £1,000 a year – on top of your savings. That government ‘top-up’ is essentially free money.
The bonus counts towards your annual ISA allowance of £20,000.
You must open the account and make a first contribution before your 40th birthday, and you can keep topping up until you’re 50.
If you do put in the full £4,000 each year, over time that bonus alone can add tens of thousands to your pot before interest or investment growth kicks in.
Martin Lewis said: “If you’re age 18 to 40, you can open a Lifetime ISA. I’d suggest, if you haven’t, you put a pound in one… the clock starts ticking.”
He said the scheme requires an account to be open for 12 months before you can take advantage of a government bonus worth up to 25% of the sum saved, and that’s exactly the point of the £1 trick.
If you open the account now with a token deposit, you activate it – meaning next year you could unlock the bonus the moment you’re ready to use it.
Not just for first-time buyers
LISAs were originally marketed as a way to help young people save for their first home – and they still are. If you use the savings to buy your first property worth up to £450,000, the bonus can be claimed tax-free to go towards the deposit.
But the money saving guru points out there’s another benefit many people overlook. For you can actually use a LISA as a retirement savings vehicle.
As long as you wait until age 60, you can withdraw money – including the government bonus – without penalty.
“This means even if you’ve already bought your first home, it’s still useful to have,” he says.
However, there’s a sting in the tail: if you withdraw money from a LISA for any reason other than buying your first home or retirement after age 60, you’ll typically pay a 25% government withdrawal charge.
That penalty effectively clawbacks the bonus and can even erode some of your own savings, making LISAs unsuitable for people who need flexible access to their cash.
Martin Lewis also flagged impending government consultations aimed at reforming the Lifetime ISA framework.
Officials are reportedly considering scrapping the broader retirement use of LISAs and replacing them with a first-time buyers ISA only, which would remove the age-60 withdrawal option altogether.
His advice? Open the account now with a symbolic £1 – just to keep your options open.
It’s cheap and simple, and you might regret missing out if the rules shift later.
As Lewis himself put it: “Hey, it’s only a quid. It’s worth the quid for the option to future-proof.”
