Martin Lewis warns over Government scheme that leaves savers with less than they paid in

Rishi Sunak
Rishi Sunak

Half a million young savers and first-time buyers risk facing hefty fines to access their savings under the Government’s Lisa scheme, Martin Lewis has warned.

The MoneySavingExpert founder said that had a private firm acted in a similar way, it would “be getting close to mis-selling”.

The Government savings plan for younger first-time buyers boosts deposits by 25pc when they are used for a home.

But the £450,000 threshold for a property to qualify has been frozen since the scheme launched in 2017, while UK house prices have grown by 35pc. If the threshold had risen, it would now be £607,500.

It means that savers who can’t find a suitable property under the threshold face a penalty of 6.25pc, leaving them with less than they put in.

Mr Lewis said: “Savers had a legitimate expectation that – over six years, amid huge house price inflation – under a fair system there would have been some uprating to the maximum house purchase limit.

“Without it, a chunk face being priced out, having to spend more on a property, and then having to pay the state a fine to access the money they’d put aside for a deposit. Then, to take the biscuit, the fact they then have a reduced deposit can decrease the value of the mortgage they will be accepted for.”

MoneySavingExpert has sent a report to the Treasury and the Financial Conduct authority, urging the Government to update the rules.

Mr Lewis said: “The changes we’re asking for – either ditching the fine for those buying houses that no longer qualify or increasing the threshold, or both – are simple, easy to put into practice and would cost a relatively small amount in Government terms.”

The consumer advocate website wants the Government to either raise the threshold to £607,500 and then index-link it to future house price growth or remove the penalty.

Half a million people aged 18 to 39 have made use of the savings scheme since its launch in 2017. Savers can save up to £4,000 a year, receiving a 25pc boost resulting in a bonus of up to £1,000. For many, it is now emerging as a false economy however, with the only way to avoid the penalty being to put the money towards a pension instead.

Jess Rostron, a 38-year-old architect from London, found the scheme “disappointing and frustrating” when she was ready to buy last year after saving into it for four years.

She said: “A £450,000 limit seemed like a reasonable cap for a first-time home in London when LISAs launched, but now it’s not. I feel I’m trying to use a Government scheme for exactly what it was intended for, but can’t.”

Ms Rostron had saved £18,800 but would lose £4,700 in capital, interest and bonuses, leaving her £940 worse off than had she not used the scheme. She chose to rent for longer rather than buy over the threshold.

Published by anthonyhayble

I AM A PROFESSIONAL BLOGGER WHO BLOGS ON EVENTS, NEWS AND CELEBRITY ACTIVITIES. YOU WILL GET THE LATEST BLOGGING UPDATES WITH UP TO DATE NEWS AND EVENTS THAT MIGHT INTEREST YOU. COMMENTS AND LIKES ARE ALSO WELCOMED. I AM STILL IN THE PROCESS OF BUILDING AND UPDATING MY BLOGS AND IT WOULD BE UP AND RUNNING SHORTLY. THIS IS STILL A NEW SITE AND WILL GREATLY IMPROVE WITH TIME

%d bloggers like this: