Brits could earn some extra cash for free by making the most of a particular savings account.
According to the most recent government data (2020-2021), only 553,000 adults contributed to a Lifetime ISA in order to either save money towards their first home deposit or for their retirement. A LISA pays out a 25 per cent bonus on savings made up to £4,000 each tax year, equating to £1,000 each year.
Any adult between the ages of 18 to 39 can open up the account while money can be paid into it until the account holder turns 50. Following this, the money can be withdrawn to use towards a deposit for a first home, or for retirement once the holder turns 60, the Mirror reports.
Read more: DWP to issue extra cash up to £172 a week from April on medical grounds as full list issued
If you open the account at 18, you can choose between a Cash LISA or a S&S LISA. By paying the full £4,000 each year, you could earn as much as £32,000 of free money by the age of 50. Interest earned on LISA savings or your investing returns are also tax-free.
More than 18 million adults in the UK are currently eligible for a LISA. Brian Byrnes, head of personal finance at Moneybox, which collated the data, said: “They say there is no such thing as free money, but that’s not strictly true in this case.
“The Lifetime ISA was launched by the government in 2017, specifically to encourage younger people to get into the habit of saving – whether that’s towards their first home, or for a more comfortable retirement.
“Every day we see how invaluable the Lifetime ISA is in helping young people start planning for their future, resulting in many thousands of people being able to buy their first home far sooner than would otherwise have been possible.
“So far an entire generation of first-time homeowners has benefited, with more than 118,000 homes bought with a Lifetime ISA across the length and breadth of the country.
“And while the Lifetime ISA may not be suitable for everyone who is eligible for it, we believe far more could be benefiting from the fantastic government bonus than are currently doing so.”
It's important to note there is a £450,000 price cap on any first-time property purchased with a Lifetime ISA. However, Brian adds: "The £450,000 property price cap has affected less than 1% of our LISA customers. With the average price of properties purchased by our LISA customers around £270,000, it’s clear the Lifetime ISA is working well for 99% of our first-time buyers.”
A study of 2,000 adults, commissioned by the saving and investment app, via OnePoll, also found that over the last 12 months, 47 per cent of 18-24 year olds and 36 per cent of 25-34 year olds have seen their disposable income drop.
Brian continues: "Planning for the future – whether that’s buying your first home, or preparing for your retirement years – has never been more important.
“The cost-of-living crisis has made people want to be more financially resilient, and getting the bonus cash from the Government to boost your hard-earned savings can be a great way of helping that to happen.
“Knowing that people buy their first home at the average age of 32, if you were to continue saving with a LISA afterwards, and are able to save the maximum amount for your retirement until the age of 50, you’d have saved £72,000, and get £18,000 in free money – with interest and investment growth on top of this.
“That’s definitely not to be sniffed at.”
Read next:
'I tried the 50/30/20 budget to see if it's realistic during the cost of living crisis'
'We started our business with £150. Now it's worth millions'
Energy price guarantee to be extended at £2,500 - what the change means for you
‘We bought three run-down flats for £420,000 and transformed them into our dream minimalist home’
