Are you considering a Lifetime ISA (LISA) to help you get on the property ladder? While these accounts offer a tempting 25% government bonus on your savings, it’s crucial to understand the potential pitfalls.
Money Saving Expert Martin Lewis has sounded the alarm about hidden penalties associated with LISAs. He highlighted on BBC Radio 5 Live that withdrawing your money for any reason other than buying your first home or reaching retirement age (60) results in a hefty 25% penalty.
Imagine saving £10,000. With the government top-up, you’d have £12,500. However, if you withdraw the money before buying a first home or reaching 60, you’ll be hit with a £2,500 penalty, leaving you with only £9,375 – less than your initial investment.
Lewis revealed that £15 million worth of penalties were paid out in the latest tax year. While he understands the purpose of penalties in ensuring responsible LISA usage, he highlights a significant issue. The property threshold limit for LISA withdrawals, set at £450,000 in 2016, remains unchanged. This means that many aspiring first-time buyers, particularly in high-cost areas like London, are now priced out of the market as property values have risen significantly.
Even if they wish to use their LISA for its intended purpose – buying a first home – they face a hefty penalty if the property exceeds the £450,000 limit.
Winter Fuel Payments: Changes in Eligibility
The Department for Work and Pensions (DWP) has announced significant changes to Winter Fuel Payments, a scheme designed to help pensioners with heating costs during the winter months. Starting this winter, eligibility will be restricted to those receiving Pension Credit, meaning millions of pensioners will miss out on this vital support.
The DWP has confirmed that all pensioners will receive a letter explaining the changes by mid-October. They are encouraging anyone who may be eligible for Pension Credit to apply by December 21.
Other Financial News
– Millions of households are set to receive a £150 discount on their energy bills this winter through the Warm Home Discount. This one-off payment will be applied automatically to most bills starting in November.
– Next has warned of store closures after experiencing a £30 million legal loss.
– Martin Lewis has issued a 10-day warning to train travellers going home for Christmas, advising them to book their tickets in advance to avoid higher fares.
Staying informed about financial news and potential changes to government schemes is vital. Consider consulting with a financial advisor to understand the implications of different financial products and ensure you make informed decisions about your savings and investments.
