Martin Lewis warns people will be 'penalised' for withdrawing own money

Martin Lewis has explained a Lifetime ISA savings account that pays a jaw-dropping 25% bonus. ITV star Mr Lewis, who is a BBC Sounds podcast host, has explained that many high street banks and building societies don't offer Lifetime ISAs for a 'very simple reason'.

Writing into his BBC Sounds podcast, listener Carly asked: I've heard you talking about LISAs but after doing some research we couldn't find any high street banks or building societies that offered it. was worried if he applies for a LISA... I'm just wondering why the banks and building societies don't offer LISAs anymore."

Money Saving Expert newsletter writer Mr Lewis pointed out that mainstream banks have historically shied away from LISAs for a "very simple reason" before delving into a brief history lesson for his audience. He traced the origins of LISAs back to George Osborne's tenure as Chancellor, saying: "This was an experimental product by George Osborne.

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"He introduced the saving for retirement option as he sought an alternative to traditional pension savings. The rationale behind this, according to Lewis, was Osborne's accounting strategy; by encouraging LISA savings over pensions, the immediate burden on the exchequer is lessened, with costs only arising when individuals withdraw their funds."

"The problem is, for the vast majority of people, LISAs are not the best place to save for retirement," he added. "The only individuals for whom LISA appears a decent option are those who've exhausted all their regular pension entitlement or basic rate, self-employed taxpayers. As a result, many major banks and building societies were so fearful they would be accused of mis-selling...They decided the least risky course was simply not to offer Lifetime ISAs."

Lifetime ISAs are accessible to individuals aged between 18 and 39 with an annual limit of £4,000 they can contribute each year. The government adds a 25% bonus on top of whatever interest rate the provider offers on each LISA.

Mr Lewis said: "If you attempt to withdraw it for any other reason before you're 60, terminal illness being another exception, you incur a penalty effectively of 6.25% of the money you put in. It's more complex than that but we'll label it as such."