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00:00Thank you so much.
00:11The budget dropped a bombshell on Savers.
00:14The cash ISA limit is to be slashed.
00:16The lifetime ISA may be replaced.
00:19Savings tax is going up.
00:21So, tonight, I'll cut through the noise to explain
00:24what it all means in practice
00:26and how to boost your interest to the maximum on the back of it,
00:29including all the best buys.
00:31Plus, as we've had over 10,000 questions in,
00:35on the budget since last week's special,
00:38I want to dig deeper to help you navigate the changes you've asked most about,
00:42including salary sacrifice on pensions, energy bills,
00:46and exactly what the Chancellor meant when she said
00:48those living solely on the state pension won't pay tax,
00:51and I'm going to use some unshown footage from that interview
00:55to help make sense of it all.
00:57Then, in menus you can use, there's now a free £225 up for grabs for switching bank,
01:02a litre of Baileys for just a tenner,
01:05and both Spotify and Amazon Music are offering four months ad-free for free.
01:10And now, speaking of music, to provide the smooth counter-melody to my rapid-fire percussion,
01:15it's Cinette Quachy, everybody!
01:19Thank you very much, Martin.
01:20Yes, it's time to get your questions in for Martin.
01:23Send them over on X or on threads.
01:25You can use the hashtag MartinLewis, or you can email the team,
01:28MartinLewis at ITV.com.
01:29And always remember, if we don't use them tonight, we might use them in a future show.
01:33And as always, a huge welcome to our studio audience.
01:36Wave your wallet!
01:37Oh, lovely, lovely!
01:38It was very busy last week, wasn't it?
01:43We did two shows, one on energy and one on the budget.
01:46So, here's a question that does both for you.
01:48It's coming from David.
01:49Now, following Martin's recommendation to fix on my energy on Tuesday,
01:53I immediately signed up to my provider's 14-month fix, the cheapest on the market.
01:57Does this mean I won't receive the £150, even though the Chancellor said everyone would get it?
02:04OK, so the £150 that was announced in the budget is to start on the 1st of April.
02:08It isn't actually £150, it's a reduction in the unit rates that you pay on electricity and gas
02:13that is a mean average £100.
02:15So, use more, your saving will be bigger. Use less, your saving will be less.
02:18Now, when you factor through what's actually going to happen in April,
02:21I've just got the latest predictions.
02:23The prediction before the budget was it was going to go up 3% in the price cap in April,
02:27but now, with the changes in the budget, it's going to come down 5%.
02:31So, not all of that £150 will actually be in your pocket.
02:34Some will just forestall the rise that would have happened otherwise.
02:37You know what I mean? Makes sense.
02:39OK, so that's a 5% cut coming in April after a 0.2% rise in January.
02:44The cheapest fix is 12% cheaper.
02:48So, even if you didn't get the £150, it's far, far cheaper to fix.
02:52But, people who saw the programme on Thursday will know I've been lobbying Ed Miliband,
02:56the Secretary of State for Energy, to incorporate that fix.
02:59He wrote a letter that he sent to me yesterday to all the energy companies,
03:03telling them they need to give people the £150 saving on all tariffs.
03:07The question is how.
03:09Whether they'll start bringing some tariffs in earlier that already factor it in,
03:11or they'll drop the price on the 1st of April.
03:13I had a conversation with one of the big bosses of the energy firms who said,
03:16there's confusion at the moment, guidance is needed.
03:19I'm going to be talking to Ofgem, I'm going to be talking to the Secretary of State,
03:22I'm going to be talking to the energy companies about how it works.
03:25But I'm 99% you will get that £150, we're just not quite sure how at the moment.
03:30So, watch this space.
03:31OK, perfect. Thank you for that question, David.
03:34Right, so, savings tonight. Let's kick you off with Sue.
03:37Yes. Sue's saying, I have 80k in a bank account.
03:39Oh, no!
03:40I need to know where the best place is to put it for interest.
03:43I do not need to have instant access to it.
03:45Could you advise, please?
03:47Don't put it in your bank account.
03:48You're never going to get good interest in £80,000 in a bank account.
03:51Good, you've got 80 grand, but it's in the wrong place.
03:53I mean, we should be able to get you...
03:54You're earning nothing, so we should be able to add probably £4,000 a year,
03:59£3,800 a year of interest for you for doing it right.
04:02Two things before I start on savings.
04:04First of all, if you have expensive debts,
04:07you should look to clear the debts before you start saving.
04:10That's a golden rule.
04:11You always want a cash emergency fund, but clear the debts before saving.
04:14And also, really important, because she says,
04:17I do not need to have instant access to it.
04:20If you've got money that you're not going to be touching
04:22for over five years, in general, you would be better to invest it,
04:26not to save it.
04:28Put it in a broad spread of investments, and over the long run,
04:31it should go quicker than you would putting it in savings.
04:33And next week, for the first time in the 13-year history of this show,
04:36I'm doing an investment special.
04:38We're going to be talking about how to invest next week.
04:41For now, though, I'm just going to focus on the savings.
04:44I'm going to get you to put that question up later,
04:45because I'm going to do some...
04:46I'll keep it up for now.
04:47..stuff about the budget before I get into the others.
04:49Let's do the big briefing.
04:52OK, so this is the where are we now.
04:54The first thing to say, a cash ISA is just a savings account
04:59where the interest isn't taxable.
05:01Isn't taxable, not isn't taxed.
05:04Isn't taxable means it doesn't even count towards your tax total.
05:08It's not really recorded for your tax total.
05:10It's totally separate.
05:11But it's just a normal savings account.
05:13Now, all UK adults can currently put up to £20,000 in a tax year
05:17in ISAs, in cash, in shares or in a mix.
05:19Once money is in an ISA, it remains tax-free,
05:22so you can build up an ISA pot.
05:23What do I mean by that?
05:24Well, let's say you put £20,000 in two years ago,
05:27and then you put £20,000 in last year, that's £40,000,
05:29and then you put £20,000 in this tax year, that's £60,000,
05:31and then £20,000 in next tax year, that's £80,000,
05:34and then the next year it's dropping for some to £12,000,
05:36but suddenly I've got nearly £100,000, haven't I?
05:39And I've got interest on top,
05:41which is why some people have hundreds of thousands of pounds
05:43in cash ISAs and over a million in shares ISAs,
05:46because they can grow more quickly.
05:48That's what I mean year by year.
05:50So, the change from April 2027,
05:54the cash ISA limit is going to be cut to £12,000 a tax year
05:57for under 65s, lots of confusion on this.
05:59So, for me, it's a piece of cake.
06:03There you are, there's my cake.
06:06The ISA limit is £20,000 and will remain £20,000
06:10even for under 65s after 2027,
06:14which means you could put £20,000 in a shares ISA.
06:18You could also choose to put some in cash.
06:20So, let's say you put a grand in cash.
06:22Well, that reduces the amount you can put in shares by a grand,
06:24because it still has to total £20,000.
06:26And you can do that all the way up from 2027 to £12,000.
06:31So, you could have £12,000 in cash and £8,000 in shares.
06:36But, of course, you don't have to put the money in shares.
06:39So, you can just, from that point, have £12,000 in cash.
06:44That's how it works. That's how the new rule would work.
06:47£20,000 total, maximum £12,000 in cash.
06:52But the key to this rule is it only impacts new money paid in.
06:57Any money, remember all those years and that jumping
06:59that I'm not going to do a go-end because I'm not that well?
07:01All that, that's already in an ISA.
07:04That doesn't impact, the allowance doesn't change that at all.
07:06And all that old money you can still transfer to another cash ISA provider
07:09without any problems whatsoever.
07:12Just before you go any further on that.
07:13Good, because I need a sip of water.
07:14OK, you take that water.
07:15We've just had this come in from Jane.
07:16So many questions like this, actually, Martin.
07:18Can you open a stocks and shares ISA using the full £8,000 amount
07:23and a cash ISA using the full £12,000,
07:26and then transfer your stocks and shares ISA to the cash ISA
07:30during the same tax year to get around the new cash ISA limit?
07:34Isn't that a clever work-around?
07:36And, unfortunately, the Treasury are just as clever
07:39because they have said, and this is due to consultation,
07:42but it's going to happen, from 2027,
07:44you will not be allowed to do a transfer from a shares ISA to a cash ISA
07:49to stop people like Jane.
07:50Nice try, Jane, but no go, I'm afraid. Sorry.
07:52I'm not going to work for Jane. OK.
07:54Right, we've had this tweet come in from 40.
07:57Whoa, Martin, what is this?
07:59A charge on any interest paid on cash held in the stocks and shares
08:03or innovative finance ISA?
08:06Yeah, so this is the other work-around that they're blocking.
08:09I should say these only apply for people aged under 65.
08:12Those over 65 can still do the shares to cash transfer.
08:15So what they're going to do is, if you put money into a stocks and shares ISA
08:18and you hold it in cash and get paid interest in it,
08:20so you're effectively using it as a cash ISA,
08:22you will have a tax charge.
08:24We don't know the amount of the tax charge yet,
08:26and we don't know after what length it will be applied.
08:28I mean, it would be ridiculous to apply it for just a week
08:30because sometimes you need to hold money in cash
08:31while you're buying a new investment.
08:33But we don't know because that's going to be up for consultation,
08:36but they're blocking that loophole as well.
08:38Do you understand what people are trying to do?
08:39You can't hold cash in the shares ISA if you're under 65 from 2027,
08:43April 2027.
08:44OK, 40 tried. Let's go to Steve.
08:46Steve's got this question here.
08:48He says, hi, Martin. Great show.
08:50With the new ISA changes, can I still move funds from cash to stocks and shares?
08:55You can move funds from cash to stocks and shares and cash to cash,
08:58stocks and shares to stocks and shares within ISAs,
09:02but you can't move, if you're under 65 from 2027, shares to cash.
09:05So yes is the answer to that question.
09:08OK, let's carry on.
09:09OK, so that's not the only change happening to savings.
09:12The income tax on savings interest will rise by two percentage points in 2027.
09:17Which means ISAs matter even more.
09:20Because remember, they're not taxable.
09:21They're not part of this.
09:22Now, most people can earn £1,000 a year if you're a taxpayer of interest without paying tax on it.
09:29Think of it. Top paying account at the moment is 4.5%.
09:31You'd have over 20 grand in savings before you paid any tax on the interest at all.
09:36And it's only the interest you pay tax on.
09:38Higher rate taxpayers £500 a year you get.
09:40Taxpayers earning more interest outside of an ISA.
09:44ISA interest doesn't count for this.
09:45Well, you'll pay tax on it.
09:48From April 2027, the tax rates will be, on savings and also property income,
09:5422% for those who are on their normal earnings pay 20%,
09:5742% for those who pay 40%, 47% for the top 45% rate taxpayers.
10:02Tiny note, on last week's show, in the budget special,
10:04I said that dividends tax comes in in 2027.
10:07It's 2026.
10:08I checked afterwards.
10:09I got that wrong.
10:10I do apologise.
10:11Yeah, so that is all, as you can see, a big change and being much tighter, frankly, with what's going on with savings.
10:19Now, the reason for some of these changes, according to the Chancellor, isn't to raise revenue, but to encourage younger people to invest.
10:28And I think the stuff I haven't shown you from my interview with the Chancellor last week has some stuff on this that you might find interesting now.
10:37So, 90% of people will still pay no tax at all on their savings.
10:49If you go out to work, you pay tax, whatever income tax rate you're at, and you pay national insurance.
10:58And if you get your income from renting out a property or from dividends or from savings, you don't pay that national insurance.
11:05So, we are narrowing the gap.
11:06And now let me say something about ISAs because this is a policy that I really believe in
11:14and I believe will make sure that savers get better returns on their savings.
11:19And the reason I say that is if you, in 1999, started putting £1,000 into a cash ISA and a stocks and shares ISA,
11:30and you did that every year up until today, you would be £50,000 better off from the stocks and shares ISA.
11:37And I want more people to be able to benefit from growing businesses, especially growing businesses here in Britain.
11:44And so, we're keeping the £20,000 limit.
11:47We're not changing that, but we're saying that if you're under 65, £8,000 of it will be reserved for investment.
11:55There is also a wider economic benefit because if you look at the US, or Sweden actually, which has made reforms recently,
12:02they have a much better culture of investment by ordinary people into the stock market.
12:08And that really helps businesses in that country to grow.
12:12And we don't have the same thing here.
12:14And I want to keep businesses here in Britain and help them access finance here in Britain.
12:18And so, this also has a wider economic impact as well as getting better returns for savers.
12:23Now, as you know, I agree with your diagnosis of the problem.
12:26We underinvest in this country and I'm pledging to you I'm going to do more communication out there to improve that.
12:31Which is brilliant because, you know, you obviously have such a big influence and the 5,800 questions shows that.
12:40And people watch you because they want to know what the best thing to do is their money is.
12:44I disagree with you over the solution.
12:47And I think Annie has comments, sort of, says my feeling.
12:52Why does she think that slashing the very important cash ISO limit will suddenly get people to start investing when a huge chunk of savers don't know the first thing about stocks and shares?
13:01Won't it just mean they pay more tax on their savings?
13:0390% of people with savings will still have no tax on their savings.
13:10You can still put 12,000 pounds.
13:12Do you really think cutting the cash ISO limit will make a substantial difference in the amount of people who invest?
13:16I agree with the guidance. I agree with education. I'd love you to incentivise investing.
13:20But the cut?
13:21If we were doing that on its own, you're probably right, but we're not doing it on its own.
13:25We're at the same time changing the advice and guidance rules.
13:30I've worked with the Financial Conduct Authority to get these changes in.
13:34They'll start this coming ISA year.
13:38Well, only time will tell whether the Chancellor's plan will mean more people invest.
13:43But on the show next week, we will be going through how you can invest.
13:46That £50,000 extra figure, of course, depends on what your investment was in the stocks and shares ISA.
13:51Maybe an average figure, some people will be a lot more, some it will be a lot less.
13:54And understanding that risk profile is all that investment is about.
13:58Lots more to come from me and the Chancellor later in the show, things you haven't seen yet.
14:02Great stuff. Thank you, Martin.
14:03Well, after the break, Martin will run you through all the best buyers, cash ISAs and savings.
14:08Plus, what's happening to the lifetime ISAs?
14:10Big news for first-time buyers. We'll see you in four.
14:13APPLAUSE
14:26Welcome back. Lots coming in, as usual, over the break.
14:29But let me bring this question back up for you, the one we had from Sue.
14:32She's got the 80K in her bank account, needs to know the best place to put it for interest,
14:36doesn't need instant access and wanted some advice.
14:39So, I think the first thing to say there is we need to split it into different accounts,
14:44because different accounts have different practices.
14:46Never think you're stuck with one savings account.
14:48We need to minimise the tax, because if you're a taxpayer on £80,000 of decent interest,
14:52you're going to be paying tax on it.
14:54And there are two simple routes, easy access and fixed savings.
14:58Let me go through those now. We'll start with easy access.
15:01These are the bog standard. You can put your money in when you want,
15:04and you can take it out when you want.
15:05And it's done with lump sums and generally huge limits,
15:08some up to £1 million or £2 million or whatever.
15:10But the crucial thing is you have to monitor the interest rate.
15:14The interest rates can change, both when the Bank of England moves its interest rate,
15:17but also at provider's whims.
15:19So, if you're getting these accounts, you need to every two or three months,
15:22check your interest, and if they drop the interest,
15:24ditch and switch.
15:26But the big rule, the start point,
15:29if you ever get a big lump sum, pay up your pension or sell a house,
15:32you put it in an easy access account, not your bank account, to start with.
15:35You put it in a top one, because if nothing else,
15:38you're going to get a decent rate of interest on the money,
15:41and you might have to pay tax on it.
15:43Now, two different types here.
15:46Cash ISA, a savings account you don't pay tax on,
15:49and a normal savings account.
15:52In general terms, normal savings pay more, but not at the moment.
15:56So, we have this peculiarity that the top paying easy access account on the market
15:59is trading 212, up 4.52%, only for newbies though,
16:03because the bonus is for newbies.
16:05And that pays more than a normal savings account.
16:07So, if you haven't used your ISA allowance,
16:09even if you're not going to pay tax, so the tax is irrelevant to you,
16:12well, it's just a savings account you don't pay tax on,
16:14so you may as well put it in there.
16:15Next best cash ISA is 4.49% with Plum.
16:18And then you've got the Bank of Ireland,
16:19which is actually sort of the parent of the post office savings account,
16:22worth you knowing that.
16:23What's interesting about this one, you see these bonuses.
16:26They all do this, they do a bonus.
16:27So, it's a short-term temporary interest rate hike.
16:30Two ways to look at that.
16:31In a year's time, because so much of this is the bonus,
16:35only 1% is variable, 3% is the bonus,
16:38the rate's going to be terrible.
16:40But for the next year, you've got a guarantee of at least 3.11%.
16:44I tend to be in the, I'd take the 3.11% guarantee rate.
16:47And I put that in because it's a bigger name.
16:49Trading 212 pays more, though.
16:51In normal savings, as long as you're new to it
16:53and you have to open its current account,
16:54but there's no hard credit score for doing that,
16:56Chase is the top pair.
16:57Again, there's a 2% newbies bonus.
16:59If you want a big name, Kahoot is part of Santander, 4.4%.
17:04This is a weird, easy access account.
17:06You put your money in, after a year it matures,
17:08i.e. into a pants-paying savings account,
17:10and you'll have to ditch and switch there.
17:12Although, if you've got over 25 grand,
17:14it can be beaten by monument at 4.51%.
17:16So, all of those will work, depending on what you want to do.
17:19Just to mention, yesterday,
17:21the savings safety protection went up.
17:23You're now protected up to £120,000 per person,
17:27per financial institution.
17:28It used to be £85,000.
17:30Any account I mention has that protection,
17:33or I wouldn't be including it here all the way through the show.
17:36Here's the interesting stuff, though.
17:38Let's imagine you've filled your cash ISA
17:40and you have enough other savings that you're paying tax on it.
17:43Now, we do a comparison between these two.
17:46The rate on cash ISAs,
17:48even if you're paying tax on your other savings,
17:50that's the actual rate you'll earn, because it's not taxable.
17:53The rate on this Chase account is the top one at 4.5%.
17:56If you're paying tax on it, as a basic 20% rate taxpayer,
17:59you'll effectively get 3.6%.
18:02Cash ISA smacked the pants off it.
18:04If you're a higher-rate taxpayer,
18:06you're effectively getting 2.7%.
18:07Cash ISAs really smacked the pants off it.
18:10If you're a top 2.5% rate taxpayer,
18:12I can't even think of where to go with that one,
18:14but those are a lot better.
18:15You see the difference,
18:16because you'd have to pay tax on these if you're a taxpayer,
18:19and that's when cash ISAs really come into their own.
18:21Worth noting, too, there are regular savings accounts linked to some banks
18:24that can pay you up to 7%,
18:26but only on up to £200 or £300 put in a month.
18:28These are for lump sums.
18:29OK. OK.
18:30I hope that helps for Sue.
18:31Does that make sense?
18:32You following me?
18:33Yeah. OK. Good.
18:34Good. Right.
18:35Now, Julie's been in touch, Martin.
18:36She's got this question.
18:38What's the difference between a fixed ISA and a cash ISA?
18:42Nothing at all.
18:43Cash ISA is just a savings account you don't pay tax on.
18:46And just like normal savings account, you have easy access versions,
18:49and you have fixed cash ISAs.
18:51So a fixed ISA is a fixed cash ISA.
18:54It's where I'm going next.
18:56So the problem with those easy access accounts is the rates can move.
18:59If you want a guaranteed rate, you get a fix.
19:02The problem with a fix is the rate is locked in, but so is your money.
19:07You can't withdraw money during the time on a normal fix.
19:11Cash ISAs by law have to allow you to withdraw the money,
19:15but you normally lose, say, 120 days worth of interest.
19:18Each one has different terms.
19:20Now, what you'll notice here is whereas easy access,
19:24the cash ISAs and the normal savings were roughly similar,
19:28here cash ISA rates are manifestly worse than the top normal savings.
19:34So in this case, if you want to lock money away,
19:37and if I go back to our person with £80,000 and she doesn't need easy access,
19:40she can get guaranteed rates in these.
19:43In this case, if you're going to need to take the money out
19:46and you're not paying tax on that element of your savings,
19:49so let's say it's up to about the first £20,000,
19:52you would go with the top normal fixes.
19:55I'm going to stand here so you can freeze frame at home
19:57and read all the best buys so I don't have to go through them.
19:59If you are going to pay tax on your savings,
20:01there's my little lozenge of information.
20:04Cash ISA fixes will always win if you're a taxpayer on your savings.
20:08Fixed-rate savings. I just need to be really clear.
20:11Remember, you can earn £1,000 a year of interest
20:13without paying tax on it.
20:14If you're within that, these will win.
20:17If you're above that and out, then you need a cash ISA,
20:20because that will win.
20:21OK, super. Right, I've got a couple of questions for you here, Martin.
20:24Sure.
20:25This one's coming in from Julianne.
20:27She's asking, I'm about to refix my ISA savings.
20:29I don't need the money.
20:31So is it best with the current markets to fix for three or five years?
20:36So the rate at which new fixes are set tends to be based on the city's prediction
20:42of long-term interest rates.
20:44Now, we have a base rate decision coming on the 18th of December,
20:47which the markets currently think we're likely to see base rates drop by a quarter of a percent.
20:51Now, some of that will already be factored into these rates,
20:54but because it's not guaranteed, not everything will be.
20:57So the first thing to say is,
20:59while easy access rates are better at the moment than fixes,
21:03if interest rates do continue to drop over the next year or so,
21:07in a year's time, these rates could look very, very strong compared to the best easy access.
21:12But most importantly, fixed rates give you certainty.
21:16You know exactly what you're going to get.
21:19Now, the reason that the interest rates are lower after five years than one year
21:23because the long-term prediction for interest rates is that they will drop from where they are right now.
21:27If you were to get a one-year fix and then wanted to fix again for another three years, say,
21:32there's no guarantee that in a year's time you'll be able to get 4.25%.
21:37You might only be getting 3.25%, depending on what's happened to base rates.
21:41I don't know, I can't predict it, but the general mood music is it's down.
21:44So my answer would be, I can't give you an exact answer,
21:48but the more you want certainty, the more you want to guarantee the interest rate you get,
21:53the more you should consider fixing and fixing longer.
21:57The only risk is either you want your money out
22:00or that the opposite happens to what everyone's saying,
22:02and interest rates go in and you're locked in at too low a rate.
22:05OK. I know you want to talk about Lysas as well.
22:07Yes.
22:08And I've got a question here that's come in from Karen.
22:11Karen is saying, my son has just opened a Lysa.
22:14Has he done the wrong thing?
22:16Absolutely not.
22:17Opening a Lysa is exactly the right thing for anyone aged 18 to 39
22:21who has never bought a house.
22:22How much money you put in is different.
22:24The chancellor has announced there will be a consultation starting next year
22:29to potentially replace the lifetime Issa with a new first-time buyer's Issa.
22:34What will happen to the Lysa, I presume it will stay open,
22:36but it will be closed for new customers, much like they did with Help2Save.
22:39The reason I say it's not wrong to open one,
22:41well, let's go through the lifetime Issa details.
22:43What is a lifetime Issa?
22:45Well, first of all, it's only for people from their 18th birthday
22:48to the day before they're 40.
22:50Some of you are able to get that one.
22:54And the key to it is you get a massive savings boost.
22:57The state adds 25% on your contributions until the age 50,
23:01up to a maximum of £4,000 a year, so you get £1,000 a year free.
23:06The bonus can be used and is paid when you exchange on your first-time home.
23:12If you have ever owned a property anywhere in the world,
23:15you can't have one of these, even if you've only part-owned it.
23:18If you haven't, you can have one, even if you're buying with someone who's owned a property.
23:21It's an individual, so you could have one, they can't.
23:24If you've both never bought before, you could have one each.
23:26The alternative is you put the money away until you're age 60.
23:29So it's an alternative to retirement, to pension savings.
23:32This is the reason many high street banks don't offer them.
23:34Because, frankly, putting your money in an employment pension
23:38where they match your contributions is so much better than this,
23:41they were scared they'd be done for mis-selling by people using it for their pensions,
23:44which is why they don't offer them.
23:46This is the big problem.
23:48You can only use it on a home that costs less than £450,000.
23:53That has not gone up since 2017.
23:56I've campaigned for it to change, they haven't changed it.
23:59And this is what people are getting agitated about.
24:01So, eligibility for the bonus.
24:04This is the point. This is why I say you should open one.
24:08To use, get the bonus, and to use the bonus,
24:12you have to have had a Lysa open for a year.
24:14So I would suggest any young person puts a pound in one.
24:18And then, tick-tock, tick-tock, tick-tock, the clock's ticking.
24:21Even if you don't want to use it now, in a year's time,
24:23you might decide you want to buy a house three weeks later,
24:25you could put four grand in it, they'd give you a grand bonus,
24:27and you can use it because you've had it open for a year.
24:29So that's why I say opening it is not wrong, how much money you put in,
24:33because of the withdrawal penalty, is the issue.
24:36If you take the money out just because you want the money,
24:40or you're buying a house over £450,000, and you're not aged 60,
24:45you will pay an effective penalty of 25%.
24:49That's confusing. It doesn't really work like 25%.
24:53What it actually does is you've had 25% added on top,
24:56and 25% taken off, it leaves you with 6.25% less than you put in.
25:00You've put 10 grand in, you're going to take out £9,375.
25:04The state is fining young people to take their money out
25:08if they're buying a property over £450,000.
25:10I've had two chancellors promise me they'll fix it,
25:12or tell me they'll try and fix it.
25:14Neither of them have done it, of the last two.
25:16We'll still be working on that.
25:17You'll see me with Rachel Reid on that in a moment.
25:19And finally, if you've got one, or you want to open one,
25:22the top payers, Moneybox, Plum, Tembo,
25:24there are also investment lifetime ISAs.
25:26But if you're saving to buy a house in the next few years,
25:28you want cash.
25:29If you're doing it for your retirement,
25:30because you've already filled up your other pension,
25:32then you probably want an investment one.
25:34OK. David, good morning.
25:36Good morning? Oh, my goodness.
25:37I'll start that again.
25:38Good evening!
25:39Good evening.
25:40I know you've got a question for Martin.
25:42Yeah, hi, Martin.
25:43So, yeah, I'm in my early 30s,
25:45and I already own my first home.
25:46Sure.
25:48And I just want to know,
25:50is it worth me still continuing to add to my lifetime ISA,
25:53given the speculation about it changing soon?
25:56So, the only reason you'd do it is for retirement savings,
25:59because you can't get the bonus twice.
26:00Yes.
26:01Do you have...
26:02Are you an employee, or you're self-employed?
26:03Employee.
26:04And do you...
26:05Are you maxing out your contribution on your pension?
26:06Yes, yeah, yeah.
26:07OK, so that would always be my first step.
26:10After that, this is a pretty...
26:12You know, it's better than saving in a normal...
26:14...saving in a normal savings account,
26:15because you're getting the 25% bonus.
26:17So, it is not a bad thing to be doing.
26:19There might be other things that you can do on top.
26:21I think what I'd say to you is we're in a limbo stage.
26:24I think it would be unthinkable for them to close the lifetime ISA
26:27and not give you the bonus age 50.
26:29I mean, the worst is they'd stop you putting any more money in.
26:31So, what I would say...
26:33I mean, funny.
26:34I've just thought of this as I'm talking about.
26:35What I'd say to anybody of this age,
26:37even if you bought a house and you haven't got a lifetime ISA,
26:39put a quid in one now,
26:41just in case they do close it down,
26:43and later you wanted to use it for retirement,
26:45you've got that facility.
26:46But I'd probably...
26:47I mean, the Chancellor will hate me to say it.
26:49I'd sort of be in limbo at the moment
26:50and wait and see what happens in that consultation
26:52before I put too much more money in,
26:54because we don't know where we're going.
26:55But my guess is they'll keep it open to people like you
26:57who've opened one,
26:58but not allow anybody new
27:00to have the same situation that you've got.
27:02It's an anomalous product, this retirement savings bit.
27:04OK.
27:05Thanks for your question, Dave.
27:06Now, Megan has been in touch as well.
27:08Final question.
27:09When is the maximum value of the property you can buy
27:11with a ISA likely to change?
27:13We're looking to buy a flat in the next year,
27:15but there's not many options in London
27:17due to the £450,000 limit.
27:19We're gutted.
27:20We're likely to lose a lot of our money.
27:21I asked this to the Chancellor.
27:23Could you ask the Chancellor
27:26why they can't change the £450,000 cap on lifetime ISAs
27:30before the consultation?
27:31We've discussed this many times.
27:33So many are stuck and can't wait for a consultation.
27:36Yeah.
27:37So the consultation is getting up and running.
27:40We want to get this right.
27:41We're going to introduce a new product to a better product.
27:47This is the system we inherited.
27:49We are doing that consultation.
27:50The people with LISAs now are very worried.
27:52Many people are saying,
27:53should I take my money out of a LISA right now
27:55because of this, Chancellor?
27:56I could do with your help
27:57so that they have some legitimate expectation
27:59of what's going to happen.
28:00Well, we'll crack on with this consultation
28:02and make sure that the new product works better
28:06than the one it's going to be replacing.
28:09But I would encourage people,
28:10if you've got money in a LISA at the moment,
28:13nothing is changing.
28:15Of course, as part of that consultation,
28:17we will look at the price of the property you can buy
28:22and we will look at that for people
28:23who have already got money in a LISA.
28:25And if you have a LISA,
28:26do you think you'll be able to port the whole thing
28:27to the new product if you want to do that?
28:28That's why we're having you a consultation
28:30to answer these questions.
28:31I'll be pushing you for that.
28:32And I really encourage you and Andy
28:34and all your viewers who have got views on this
28:36to feed into that consultation so we get it right.
28:40So, well, not much meat to go on on that, is there,
28:44to be absolutely honest.
28:45So let me give you my view.
28:46First of all, by the way,
28:47I'll also be pushing for the help to buy ice
28:48to be able to go into this new product as well,
28:50which it should be.
28:51If you're going to be buying a house under £450,000
28:54in the next three or four years,
28:56I would absolutely certainly be opening
28:58and putting my money into a lifetime ISA.
29:01If you think you might be buying a house in the South East
29:03where the price is over £450,000,
29:05I would be very cautious about putting a substantial chunk
29:08of my money in the cash ISA because of the penalty
29:10and we don't know what's happening to it.
29:11As for putting pension money in, I would open an ISA,
29:14but I would be cautious about putting too much money in there
29:17at the moment because we simply don't know what will happen.
29:19Although I suspect it will be fine.
29:21I mean, you've got the same answer as I've got on it.
29:24OK, thanks, Martin.
29:26Well, still to come, we move on to the state pension.
29:28Will you pay tax on it?
29:30Plus salary sacrifice on private pensions.
29:32We'll see you after this.
29:33Welcome back. We've been talking savings.
29:47We're also talking the budget and I'm hoping to keep talking.
29:49I've got Lurgy and I'm a bit brain frazzled,
29:51but hopefully the information's coming across, Jeanette.
29:53Yeah, there is so much coming in on social media,
29:55but I've got this success from Donna
29:56and it's come about the Help to Save scheme.
29:59Thank you, Martin.
30:00I've received my savings of £2,400
30:03and my last bonus is £600 this month.
30:06I'll be putting this into a savings account
30:07and carry on saving even more.
30:09Well done.
30:10I've now even recommended the Help to Save scheme
30:12to friends and family to help them save too.
30:14Good stuff.
30:15Yeah.
30:16Yes, you can give that a round of applause.
30:17It won't stop yourself.
30:18Nice.
30:21Look, Help to Save, incredibly important.
30:23It's unbeatable savings.
30:24If you are on Universal Credit and you work,
30:26you can open one of these accounts.
30:28Even if you move off Universal Credit,
30:29you can still keep it going.
30:31The way it works,
30:32you can put up to £50 a month in
30:34and then after two years,
30:35you get a 50% bonus on the highest amount you had in.
30:38So imagine you've got up to £600,
30:39you had to take it out because you had an emergency.
30:41You couldn't put any more money in.
30:43Still at the end of two years,
30:44you get a £300 bonus and then you can do it again.
30:47And this has now been made permanent in the budget.
30:49It was due to end next year.
30:51And in a couple of years' time,
30:53not just those who are working,
30:54but people on Universal Credit who have parenting
30:57or kinship or carers' responsibility
30:59will be able to get it too.
31:00So if you're on UC and you work right now,
31:02you should check that out.
31:03No other form of saving comes close to beating it.
31:05Awesome.
31:06Well done, Donna.
31:07Let's say good evening to Sophie on our virtual walls,
31:09right behind you.
31:10Hiya, Sophie.
31:11Hi, good evening, everyone.
31:12Hi.
31:13What can we do for you?
31:14I've recently opened up Elisa to save for my first house
31:18and I've got the full amount in there
31:22and I've got another 16,000 saved in premium bonds
31:27and I'm just wondering,
31:28is it worth opening up a cash Elisa
31:30and transferring my savings there
31:33or just sticking with premium bonds?
31:36Well, people know I'm not the biggest fan of premium bonds.
31:39The premium bond is a prize draw where the interest is...
31:42Your money is safe, but the amount of interest you get
31:44is based on a prize draw.
31:46The current prize fund rate is 3.6%.
31:50Have we got the easy access savings?
31:52Yes.
31:53So, look, 3.6% isn't close to any of the top easy access savings.
31:58And these cash ISAs are tax-free.
32:00But more than that, because that is the mean average,
32:04but I'm not going to explain this in detail because I haven't got time,
32:06but the typical luck, someone with typical luck
32:08would win the median average.
32:09In other words, if you lined up everybody with the same amount
32:11of premium bonds in a row, how much would the person in the middle win?
32:14And the person in the middle would always win less than the prize fund.
32:18You're more likely to win closer to the prize fund the more you've got.
32:2116,000 isn't bad.
32:22The closer to 50,000, the more likely you are to win it.
32:25For me, premium bonds are only for those people who are high earners,
32:30who are paying tax on their savings and who can put up to 50 grand in.
32:35So, I can't say which will win because you might be the one person
32:39who wins the million.
32:40But based on statistics and typical luck,
32:43you would actually need to be very lucky for premium bonds
32:47to return more on £16,000 than the top cash ISA.
32:50That's the only way I can phrase it.
32:52You'd have to be very lucky for premium bonds to win.
32:54It's not impossible, they will do.
32:56But your much safer bet is to go with the top cash ISA.
32:59Does that make sense?
33:00OK. Yeah, that makes sense.
33:01Thanks for your help today.
33:02Thank you, my pleasure.
33:03And people read more on premium bonds
33:05because it's more complex than you think.
33:07OK. Good luck, Sophie.
33:08Now, change of subject.
33:09We broke big news, didn't we, on the show last week
33:11about tax on state pensions.
33:13Lots of people have been getting in touch, including Kevin,
33:15with this question here.
33:17Following on from your show on Thursday,
33:19I've been trying to find out if a pensioner who receives
33:21a state pension and their other income
33:23is all tax-free, i.e. from ISAs or premium bonds
33:27or under the savings allowance.
33:29Will they have to pay more tax?
33:31It's a really interesting question.
33:33It's actually two questions.
33:34Forgive me coming onto your stage.
33:35I've got Lurgy, move back.
33:37Right.
33:38So, look, ISAs are not taxable,
33:41so they won't count, they're not taxable.
33:43Premium bonds are not taxable.
33:45Under your savings allowance is taxable earnings,
33:49but you haven't turned over the allowance.
33:50So that's a slightly different category
33:52because you've got taxable earnings.
33:54The honest answer is we don't yet know how this will work.
33:58Now, let me explain the basics of the problem to you.
34:00I've done a graph on it this week,
34:01which I think clears up what's going on a bit.
34:03This is the full new state pension.
34:06The personal allowance is frozen.
34:07We know that until 2031.
34:09That's the amount you can earn tax-free each year.
34:11Here is the full new state pension.
34:13This is where it's going to go up to next April.
34:15It's only 30 quid below that allowance.
34:17So anyone who's got any other form of earnings,
34:19well, you're going to go over it if you've got the full new state pension
34:21and you'll have to pay tax.
34:23But from 2027, because we know the state pension has to rise by a minimum 2.5%
34:30because of the triple lock.
34:31Here's a projection.
34:32This is the minimum it could rise by the triple lock.
34:352027, it's going to be about 300 quid more than the tax-free allowance
34:41and that's staying stable and it will go more and more and more.
34:43So you can see the issue that's going on.
34:45And I played a short clip to you last Thursday about what I asked the Chancellor about this.
34:50My biggest concern was actually the admin.
34:52How are we going to have older people doing their self-assessment forms
34:55when they're 90 and they're only earning 50 quid over the limit?
34:58I'm going to play you a longer version of what I asked the Chancellor tonight.
35:02Rebecca, who says,
35:05Does my 85-year-old father, who's living with dementia,
35:08now have to complete a tax return as his state pension
35:11will take him over the personal allowance?
35:13So, if you just have a state pension, you don't have any other pension,
35:20we are not going to make you fill in a tax return.
35:23Of any type?
35:24Yes.
35:25And so, I make that commitment for this Parliament.
35:29You're right, 2027 looks like the time that it will cross over.
35:34We are working on a solution, as we speak,
35:38to ensure that we're not going after tiny amounts of money.
35:43But people will have to pay the tax, they just won't have to do a return,
35:46or will they not have to pay the tax?
35:47In this Parliament, they won't have to pay the tax.
35:50OK.
35:51You know, further out, I won't be able to make any commitments on that.
35:56But we're just looking at a simple work-around at the moment.
35:58OK.
35:59So, I haven't actually got that from the Budget,
36:01so that's really good to have clarity that they won't be paying the tax.
36:04I'm going to ask the edge case, and I know it's always difficult.
36:07Someone who's got a £50 a year private pension on top of the state pension,
36:11they're going to have to pay tax, I presume, because there is...
36:15I'm only making that commitment for people who just get the state pension.
36:19Obviously, a lot of people in retirement do do self-assessment
36:24and do pay tax on their incomes, and that's not going to change.
36:28But I do recognise that if you're just in receipt of the basic state pension
36:33or the new state pension, it wouldn't be the right thing to do
36:38to try and tax those small amounts of money.
36:41So, it's very interesting.
36:43And it's why I can't quite answer Kevin's question,
36:45because it isn't fully formulated yet.
36:47But what I find interesting, imagine someone who was a little bit
36:50off the full state pension, so they were here, let's say,
36:55and then they had a very small private pension,
36:57so they earned still less than the full new state pension.
36:59Under those rules, they would have to pay tax,
37:02and therefore they would be punished for having a private pension,
37:05which is why I think the thing isn't fully thought through yet.
37:09OK, so, we're going to keep with some questions on pensions.
37:13June's been in touch as well. June's asking,
37:15It was said on your show, the Chancellor said no one on full state pension
37:18would have to pay tax.
37:20I had the SERPs contribution on my pension,
37:22and this year was billed £71.
37:24Should I get this back?
37:25And if not, will I have to pay tax on my state pension next year?
37:29This is my only income.
37:30Had quite a lot of people in that situation.
37:32If you are on the old state pension, you get both the PASIC pension
37:36and you get the extra contributory pension called SERP state pension,
37:40you can already be over the personal allowance now.
37:45The answer is, you are taxed on it now,
37:47and you won't be able to get that money back.
37:49I'm going to play back, because I've listened to it a lot of times,
37:51what the Chancellor said.
37:52First of all, she was talking from 2027.
37:54We're not in 2027.
37:56Second, she said, we're working through how we do this.
37:59So, she answered the question to me, and it broke news everywhere.
38:03I think the truth is, they are looking to ensure that from 2027,
38:07people on the full new state pension only won't pay tax.
38:11How it works for the old pension, how have you got some...
38:14It just... I don't know how it works yet.
38:17I don't believe the Chancellor knows how it works yet.
38:19OK. Thanks, Martin.
38:21Well, coming up, your questions on salary plus battle of the Baileys
38:26and free £225.
38:28We'll see you soon.
38:42Welcome back to The Martinless Money Show Live.
38:44Jeanette, what's been coming in?
38:45Yeah, lots coming in.
38:46As usual, the team are going through all the questions,
38:48but Norman wants to know,
38:50will it no longer be worth paying more than £2,000
38:53by salary sacrifice into my pension?
38:56So, where should I put the money instead?
38:58OK, there's been a lot of confusion on that.
39:00I mean, the answer is yes, it probably is still worth it.
39:03Let me just go back to my graphic from last week,
39:05which I have explaining salary sacrifice.
39:07Here we go.
39:08So, for a basic-rate taxpayer, for every £100 you normally earn,
39:12you'll pay £8 in national insurance,
39:14you'll pay £20 in tax, this is above the personal allowance,
39:17and you'll take home £72.
39:19In a general workplace pension, auto-enrolment pension,
39:23which isn't salary sacrifice,
39:25your whole £100 will go into your pension,
39:28but you will pay £8 national insurance.
39:30So, it's still sort of a net huge gain,
39:33because you're only losing £72 in your pay packet,
39:35but you're getting £100 in your pension.
39:37With salary sacrifice, what happens is,
39:40you get a reduction in your salary,
39:42and your employer then takes that amount,
39:44puts it in your pension as well,
39:46if it's auto-enrolment, as a matching-type contribution on top,
39:49and you get the national insurance gain,
39:51and it gets the national insurance gain,
39:52which it may well give to you as well.
39:54So, you would get the whole £100.
39:56So, what we're talking about losing salary sacrifice above £2,000,
40:00is you'd move from one of these to one of these,
40:03not from one of these to one of these.
40:07So, it isn't quite as good, but let's go...
40:10It's a specialised subject I've got Charlene with,
40:12she's a specialist in this.
40:13Charlene, still worth putting over £2,000 in?
40:15Absolutely.
40:16As you've explained, because of the income,
40:18tax savings on offer, 20%,
40:21even more for higher-rate taxpayers and beyond,
40:24it's absolutely still worth using a pension
40:26to save towards retirement.
40:27Yeah, because if you're a higher-rate taxpayer,
40:29then you're going to be paying £40 of tax.
40:31And, by the way, the national insurance gain is less,
40:33it's only 2% in those cases.
40:35So, yeah, absolutely keep going on that one.
40:37OK, brilliant.
40:38Also, Helen's been in touch as well,
40:40another one on salary sacrifice.
40:42I'm not sure I'm right, but I thought salary sacrifice
40:44could bring you below the tax thresholds
40:47so you could earn more interest on savings that are outside ISAs.
40:50Will this no longer be the case,
40:52because you're no longer effectively reducing your salary?
40:54Actually, the same happens in an employee pension.
40:57If you're talking about trying...
40:59You're just above the higher-rate threshold,
41:01and you put more on your pension,
41:03even a normal employee pension that brings you below it,
41:05because it doesn't count towards that contribution,
41:07you could still therefore get the £1,000 personal savings allowance,
41:10because you're now a basic-rate taxpayer,
41:12and still be eligible for marriage tax allowance.
41:14That's the way it works.
41:16It is, absolutely.
41:17And there's actually other tax traps you can get out of.
41:19For example, the rate at which child benefit starts to get clawed back,
41:23pension contributions can bring you below that level,
41:25and also when you start to lose your personal allowance,
41:28if you have income above £100,000 or two.
41:30The one you can't get out of, though,
41:32is student loan maintenance contributions when it counts.
41:34This doesn't go towards it.
41:35So, yes, you would still, even without salary sacrifice,
41:37you could still continue to do that.
41:39All right, let's take this question then from Dave.
41:41Dave is saying...
41:56I suspect Charlene's aghast at that question,
41:58so I'll let her answer.
41:59Yeah, I mean, Dave, I want to know what this pension scheme is.
42:01That's really, really generous.
42:03Absolutely, like we said, still absolutely worth continuing with this.
42:07And please don't stop or reduce your contributions,
42:09because you might lose that 15% generous match from your employer.
42:13We don't know yet how employers might adapt,
42:16particularly those sharing some of their national insurance savings too.
42:20We've got until 2029 to know what's going to happen.
42:22But there is an assumption the matching might be slightly less.
42:24They might reduce what they're putting into your pension
42:26to help cover the costs that they're now having to pay national insurance.
42:28It could be, it couldn't be.
42:30What I would suggest is engaging with your employer,
42:32just finding out what their plans might be.
42:34But it isn't happening yet anyway.
42:35So, you know, we've got time to play all that through.
42:37OK.
42:38Let's get some news you can use.
42:40OK, so we're just doing quickies today.
42:45The first one, the Santander Edge is currently giving £200 for switching,
42:49but there's an extra £25 Amazon voucher available at the moment.
42:52And I'm hearing just before I got on air, in some places it's £35 that you can get.
42:56Now, this is my top pick bank account for bills or paying joint bills,
42:59because while there's a £3 a month fee, you get 1% cash back on bills you pay from it,
43:04household bills via direct debit.
43:06For most people, that easily covers the fee and more on top,
43:09so you make a net gain each year.
43:11We're saying that the £25 voucher you can't get going direct to Santander.
43:16It's only available on a wide range.
43:17Lots of comparison sites have got it.
43:19That's the way to get it.
43:20So if you're looking to switch bank, it'll probably be paid in March.
43:22You know, if you need some money in the new year and it's good for bills or joint bills,
43:26that's one to go for.
43:27Next, Spotify Premium Individual.
43:30Four months free, it's the ad-free version,
43:33and then you pay £13 a month afterwards,
43:35but you can cancel before you get to the £13 a month,
43:37so you can just bag the four months free.
43:39You've got to be new to premium in order to be able to get it,
43:42or new to premium individual.
43:44And matched by Amazon Music Unlimited, which is the same service from Amazon.
43:48Again, four months free, ad-free, and then it's £11 a month.
43:51You can cancel before.
43:52This is for Prime members who are new to Unlimited,
43:54or non-Prime members can get it, but they only get three months
43:57and it's slightly more expensive afterwards.
43:59And then we get to the Battle of the Baileys.
44:01I could probably do with one after this show.
44:03Now, I thought it was going to be £11.
44:06That's what predicted.
44:08But it's going to be £10 for one litre.
44:10It is £10 for one litre, normally £22.
44:13This is mainly online.
44:14It's safer to do it online.
44:15In stores, the prices vary.
44:17Sainsbury's, you need a Nectar card till the 6th of December.
44:19Tesco, a club card till the 8th of December.
44:21Asda, it's on.
44:22I don't have an end date.
44:24And Costco members, you can get it till the 8th of December.
44:27So if you want your Baileys, you're a little bit of a tipple
44:29and a topple in time for Christmas.
44:31It's a bit cheaper at the moment.
44:32OK.
44:33I'm not even sure what a topple is.
44:34I'll be honest with you.
44:35I tried to style it out.
44:36No, but it worked!
44:37I decided to admit it.
44:38You shouldn't have told us.
44:40OK, just very quickly, we've got this question that's coming from Simon.
44:43I'm looking to buy premium bonds.
44:45If I were to buy, say, a total of £10,000,
44:47is it best to buy the whole block or separates of £500 or £1,000?
44:52There are a huge number of myths out there about premium bonds
44:55that people in different parts of the country win more than others.
44:57The older bonds are better than newer bonds.
44:59They are all absolute nonsense.
45:03Every £1 bond is entered into a prize draw
45:07and has exactly the same chance as every other pound bond.
45:11Whether that pound bond was bought in 1963 or it was bought in 2024,
45:16it does not matter.
45:17So you buy £10,000 in one go, because that's administratively simple,
45:20and it will have exactly the same chances.
45:22The reason some areas win more than others
45:24is because there are more people with bonds in them.
45:26The reason people with bigger who have more savings win more often
45:29is because they've got more bonds.
45:30It is just a pure random chance lottery draw.
45:33There is no clever way that you can beat it.
45:35Well, except probably by putting your money in a cash ice,
45:38as I said earlier, but that's a slightly different argument.
45:40OK, that's it for this week. What have we got next week, Martin?
45:43Well, I mentioned at the start of the show,
45:44when you heard me say to Rachel Reeves
45:46that I'm going to be talking about investing more,
45:48because I think because it isn't my expertise
45:50and I focus on saving so much,
45:51some people get the message you shouldn't invest.
45:53I don't believe that.
45:54I'm going to be joined by an expert panel next week
45:57to take your questions.
45:58So if you've got questions on investing,
46:00where to start, what to do,
46:01how the ISAs work or anything more,
46:03do get in touch using the hashtag MartinLewis.
46:05Thanks to Juliette, thanks Charlene, thanks to the team.
46:07Bye-bye!
46:08Well, last night it was Vogue's turn to pack up
46:17and say goodbye to her campmates.
46:19Who'll be next?
46:20I'm a Celebrity Get Me Out Of Here
46:22coming up in just a few minutes.
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