Savings warning: Britons only have days left to get free £1,000 via ISA account

Interest rates: Expert advises on savings and mortgages

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The deadline for the Lifetime ISA coincides with the end of the tax year which is Tuesday April 5, 2022. Through this savings account, people can put away £4,000 every year and receive a 25 percent bonus from the Government. This means a saver can get an extra £1,000 from the Government every tax year.

However, to take advantage of this allowance, savers will need to transfer any money they have into a Lifetime ISA to be in with the chance of getting this £1,000 before this deadline.

Since the launch of the scheme five years ago, over 750,000 Lifetime ISAs have been opened by savers across the country, according to Government figures.

Overall, an estimated £3billion has been paid into Lifetime ISAs over that period, including nearly £600million of the Government’s bonus money.

In light of the cost of living crisis, many people will be looking for ways to bolster their finances to pay their rising bills.

Laura Suter, head of personal finance at AJ Bell, explained: “The new tax year next week marks five years since the Lifetime ISA was launched, after George Osbourne’s surprise announcement just a year earlier that he was creating a hybrid of the Help to Buy ISA and pension.

“A faltering start with a few providers and slow take-up has since been forgotten as wannabe first-time buyers flock to the accounts, as well as those saving for retirement.

“More than 775,000 Lifetime ISAs have been opened since they launched in April 2017, based on Government data gained through an FOI.

“In the past year 232,000 people have opened a Lifetime ISA to start saving for their first home or retirement.

“What’s more, around £3billion has been paid into Lifetime ISAs, with almost £600million of that being Government bonus money.”

An individual who opened an account on the first month the Lifetime ISA was launched, who saved a maximum of £4,000 annually, would have been given £5,000 in bonus cash from the Government.

Furthermore, this account holder would have £29,000 in their Lifetime ISA, if investment growth remained at five percent every year.

While Ms Suter recognises the benefits of the savings account, she is wary that many people will not see such a generous return on their investment.

She added: “Most investors won’t see their investments rocket to that level, but picking between a cash and investment Lifetime ISA is an important first step.

“With inflation expected to hit seven percent next month, anyone with their long-term savings in cash needs to assess if it’s in the right place.

“Generally the rule of thumb is that if you plan to use the money in the next five years you’re safer sticking to cash, but the fact that no cash Lifetime ISA comes anywhere near inflation means that savers are locking in a loss in real terms each year.”

Through a Lifetime ISA, savers are able to contribute up to £4,000 each tax year, which is part of the overall £20,000 ISA annual allowance.

For example, if someone placed £4,000 into their account, they will still be able to deposit upwards of £16,000 in other ISAs.

Any growth acquired through a Lifetime ISA is free from tax, however these rules can change and are dependent on the account holder’s circumstances.

To be eligible for this account, savers need to be between the ages 18 and 39 to open a Lifetime ISA. However, they are still able to pay into the account until they reach 50.

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