Experts are calling on savers in their late 30s to snap up a Lifetime ISA now, before its too late to claim free cash.
Amy Knight, from NerdWallet UK, warned that eligibility to open a LISA stops on your 40th birthday, so its imperative to act soon if you are approaching the big 4-0.
Explaining the benefits of a LISA, the NerdWallet UK expert said: “The end of the 2024/25 tax year is rushing towards us: There’s just one month to go to make contributions to a LISA this year and claim up to £1000 from the government.
“And, eligibility to open a LISA stops on your 40th birthday, so it’s imperative for people approaching the big 4-0 to act fast.
“Someone aged 39 who opened a LISA now could contribute £4,000 per year until they reach age 50 when the option to pay in stops.
“Over 11 tax years, the saver would contribute £44,000 and the government would add an extra £11,000. Left untouched until age 67, that £55,000 LISA pot could grow at 5% per year to more than £125,000, thanks to the magic of compound interest.
“Given rising living costs, the state pension already falls short of the income required for a dignified retirement.
“For contractors and self-employed individuals who’ve missed out on an employers’ pension schemes, a LISA can help you build a private pension pot quickly to enjoy more financial security and freedom in later life.
“From the age of 60, you can withdraw cash from your LISA completely tax free, either as a lump sum to kick-start your retirement or in small amounts to top up your state pension and any other pension income.
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“If you plan to continue working or run your own business later in life your LISA can be left to continue growing. An independent financial adviser can help you plan what to withdraw and when.”
How does a LISA work?
You must be aged 18-39 to open an account, but you can keep saving (and earning the bonus) until you’re 50.
You can save up to a maximum of £4,000 per year and receive a 25% government bonus on top.
You can withdraw the money to buy your first home (up to £450,000) or after age 60 for retirement.
But be aware there is a 25% withdrawal penalty if you withdraw for any other reason with the exception of a terminal medical diagnosis, which could mean you end up losing some of your original savings.
