Martin Lewis warns anyone 'aged 18 to 40' could be set to lose £3,125

Sounds podcast host has delved into the topic of Lifetime ISAs on his latest episode, which dropped for subscribers on Sounds and Apple Podcasts and Spotify this week.

Martin Lewis has issued an urgent "listen" warning to anyone aged 18 to 40. The BBC Sounds podcast host has delved into the topic of Lifetime ISAs on his latest episode, which dropped for subscribers on Sounds and Apple Podcasts and Spotify this week.

Writing on Twitter, now X, as he promoted the episode, he said: "Worth a listen if you're age 18 to 40 and aim to buy a house one day (or your children are that age and hope to). Feel free to share with those impacted."

On the episode, Mr Lewis said: "Well, there's been some news today, but let's just do a quick briefing on the Lifetime ISA first. The LISA is a product you can open when you are between the ages of 18 and 40. So the last day you can open it is the day before your 40th birthday.

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"You can then save up to £4,000 a year in it, and the state will add a 25% bonus on whatever you've saved. So if you save the maximum £4,000 a year, the state will add £1,000 in that year. And you can do that year after year, and you keep getting the bonus until you are 50 years of age.

"But you can take the money out only for one of two reasons. Number one, you are buying a first time property. You've never bought a property before. You've never owned a property before. And that property has to be worth under £450,000, which is the key thing I'm going to come on to. The second reason is you've hit age 60, and then you can take the money out without and you get all of the bonus.”

He said: “You've saved 10,000 pounds in an ISA. Right. You get a 25% bonus. How much do you have in there? You will have 12,000, 1250. 12,500. 12,500. Hang on. 12,500. And you've got that in your calculator. Get that in your calculator because you need that.

"You now have to pay a 25% penalty on the 12,500. So if you're struggling, times it by 0.75. Yeah. No, I couldn't. Yeah. What you get? 9,375. So you put 10,000 in, it went up to 12,500. But to take it out, you end up with 9,375, which is £625 less than you put in. So if you're taking your money out, not for one of those two reasons, you are effectively paying a 6.25% penalty to the state."

Cruelly, while £625 is less than you put in - it's also £3,100 less than the potential bonus. Mr Lewis said: "Now, it was revealed this morning, we got the latest figures that in the 23-24 tax year, £15 million worth of penalties were paid to the state. Now, I don't have that much of a problem with that, because that's to ensure that people are only using the Lysa for the reasons intended. This is my problem. The Lisa was launched in 2016.

“The property threshold limit in 2016 was £450,000. The property threshold limit is still £450,000. Many people, especially in London and the South East and other urban metropolitan areas, have been priced out by house prices going up. So they saved, as the government told them to for their first-time property, but their property is now above £450,000. And to take the money out, even to buy a first-time property, which is what this product is for, they are facing a penalty, a substantial penalty.

"Now, our estimate is of the £15 million of penalties, and this is from some surveying by a company called Moneybox, who's one of the providers, 12% were taking money out to buy another property, to buy their first-time property. Now, I think, so, that's just about £1.8 million a year of penalties are being paid by people using the Lisa for what it's intended to do.”