New first-time buyer ISA: what happens to the LISA & Help to Buy ISA? Is AI good for consumers?

26:27Sorry, you got the money at completion rather than exchange, which meant it couldn't be used towards your house deposit. The Lifetime ISA fixed that. But the Lifetime ISA was George Osborne trying a bit of financial engineering because effectively in government accounting, if people save for their retirement in a lifetime ISA, it sort of defers the cost to the state until much later on. Whereas when people save in a pension, it's the current chancellor who's sort of dealing with some of those costs. If I remember rightly, not my side, it's the economics of it. So Osborne was experimenting with this by trying to shift the way that people save for retirement.

27:00The problem happened with the lifetime ISA is that especially with auto-enrolment, which is where most people are automatically enrolled into a workplace pension where the workplace has to contribute as well, the lifetime ISA is nowhere near as good as a workplace pension for most people. And the big banks, the high street banks, were so scared of being done for misselling that they just, most of them, don't offer lifetime ISAs. So most lifetime ISA providers tend to be small fintech providers, not the big banks, because they simply wouldn't get on board because they're like, all that's going to happen is people are going to put money into their pensions on it and then we're going to get done later for mis-selling it because it wasn't the right place for them to put their retirement savings into.

27:41And so it has been riddled with these issues and there's issues that you put money into a lifetime ISA, it counts towards your universal credit allowance of the£6 ,000 that you're allowed to have in savings, whereas it wouldn't do if you put it into a pension, so it isn't as good in that way. And the withdrawal penalty has been a nightmare for people in London and the south-east of England. I mean, I gave evidence to a commons committee on this. There are some good things in the lifetime ISA that I like, but there are some bad things too. And I think Rachel Reeves decided, well, first of all, the whole retirement savings thing isn't something that she's interested in and doesn't think she should work.

28:14It should be focused on a pension. But we don't want to take it away from first-time buyers. So why don't we just simplify it and go back to a first-time buyers product? So I think what we're likely to see, supposition, guesswork, people, please, you know, don't come back to me in two years time and say you said that what we're likely to see it's my guess would be it will be a product that you can put a lump sum in you will uh then not get the bonus added as you currently do with a lifetime isa each month so what happens to the lifetime isa is when you put new money and you get the 25 then so you see it in your account the bonus will not be added until you get to exchange so they will do it exchange as a lifetime isa does and then you will get probably 25%.

28:58It will only be for first-time buyers. There will probably be a cap on house prices, but there won't be a withdrawal penalty. So when the new product, you'll be able, if you put money in and you're not going to use it for buying your first-time house, you'll be able to take it out and get your interest and there won't be any withdrawal penalty. So I think that's the way it is most likely to work. Now, one of the problems with that is one of the advantages of the lifetime ISA in terms of encouraging people to save in it is you put a thousand pounds in and then instantly you see you've got twelve hundred and fifty quid within the help to buy ISA you put a thousand pounds in or you actually put money in by the month and I would think that the new product will be a lump sum product so you have a yearly limit not a monthly limit like they do with the help to buy ISA but you you put your money in the new product you put a thousand pounds in and you've got a thousand pounds in your interest you don't see the 25 percent so I suspect what they will probably get firms to do who are providing this, and remember it's likely to be only savings providers, not investment providers, who are going to be offering the help to buy ISA, that's a guess, but I think that's how it'll work, is they will then put a note at the bottom, with your 25 % bonus, once you exchange, this will be worth X, so that they keep that sort of behavioural push economics factor in there, and it'll be how they mandate them to put that in their statements.

30:14So that's what I think we're likely to see, and those are the problems it's solving. I'm not saying I agree with all of that, but does it make sense to you what I said? Yeah. Good. Martin, rumour is, this is the question, I'm not you, rumour is the 25 % bonus won't be paid monthly on the new product but instead at a time of house purchase. Is it therefore better to open a lease to benefit your investment growth on the 25 %? Very smart question. It's so smart, it's gone right over my head. You'll have to talk me through it. So the first thing I'd say, so what he's saying is, let's take a thousand pounds just as a sum and we'll get rid of i'm just going to make it simple yeah i put a thousand pounds in a help to buy isa and probably into this new product i then get interest on the thousand pounds and that interest grows and if i never put any more in and i left it five years i'd have five years interest on my thousand pounds tax free just like i would in a normal cash isa then when it comes to buying a property the state looks at how much i put in they don't look at the interest by the way they just look at how much you put in whether that'll be the same in the new product, I don't know.

31:20And they say, you put£1 ,000 in, so we'll give you 25 % of that. So you have£1 ,250 plus the interest you earned on the£1 ,000 over the five years. And that's how much you will get towards your deposit. Okay? In the lifetime, ISA, I put £1 ,000 in, I, within a month, have the£250 bonus. So I've now got£1 ,250. I now get interest on the£1 ,250, not on the£1 ,000. And I get that interest over five years because it will compound. So the amount that I would have in if the interest rates were the same in the two, means I would have more in the lifetime ISA because I've got the compound interest on£1 ,250, not on£1 ,000.

32:13Did that make sense? Yes. Because you get the bonus earlier and you get interest on the bonus. So what this question is asking is, the answer to your question is, yes, that would be better, but there's a baboon, a big but. The new product you won't be able to invest in anyway. It will only be savings. and the lifetime ISA, everything else remaining equal. And we don't know. We don't know. You might be able to put more in this new product. You might be able to use it for a bigger house. You know, there are lots of ifs and buts. I can't give you a direct correlation, but you are right. The way, from what I'm hearing at the moment, in the new product, you won't get the compounding of interest on your bonus or in an investment product, you won't get the, you know, the equivalent of compounding in terms of reinvesting dividends or whatever you're doing with that in the new product that you would get in the lifetime ISA because of the way the bonus is structured.

33:08But whether that is enough to override the problems with the lifetime ISA compared to the new product, I don't know yet. OK. Good question, though. Do you want to do one more? Yeah, let's do one more. Do one more. OK. Susie's got an existing lease that I'm still adding to with a plan to buy in 2028. How will I know if it's better to stick with my lease, assuming that's an option, or move to the new scheme? And will the 25 % government bonus still be available? Well, we just don't know if you'll be allowed to move to the new scheme. I think that's a big question for lifetime ISA providers. My guess, by the way, is this new product.

33:45I said yesterday on Social 2027, I'm now hearing a pushback that it's probably more likely to come in in April 2028, which means the lifetime ISA will be active until then and working almost certainly exactly as it does right now until then. So if the lifetime ISA is right for you now, if you're going to be buying a house under£450 ,000 and you're going to be buying it by 2028 and you've got your money in, I would continue doing exactly what you're doing right now because that will work for you anyway. If it might be marginally better and you're allowed to transfer once we know to the new product, then great.

34:18And we'll discuss that at a future point when we know. But I do think it's very unlikely for first-time buyers buying in 2028, we will see any significant change to the way the lifetime ISA works for you. So the only... And again, there's some guesswork here. So the only thing I could say is keep doing what you're doing. If it's right for you now and you're going to be buying before 2028, it's probably still right for you. And this announcement doesn't change that. Should we move on to TELUS? Sure. Well, this is sort of my TELUS. It was your TELUS. Shall I say what it was and then you tell us why?

34:49OK, go on. So Adrian WhatsApp me to tell me something and to suggest doing a TELUS on the back. The official TELUS is, what's the most you felt financially burned by a firm or product provider because you took your eye off the ball and as you'll probably understand this happened to you didn't it yes it's quite a simple one when i i've been auto renewing um with a well-known car breakdown provider and i i thought i've got to get to grip get a grip with this because it auto renews in january each year and And so in December, I started looking at it and I realised, well, look, I was paying 550 quid a year.

35:32And if as far as I could see, if I went as a new customer, it'd be somewhere between 100 and 150. So the first thing I did, I went on, which again, I never wanted to do business with them again ever then. Fair. Right. I could see why you felt burned. OK, I felt burned. Now, I then said, well, the first thing I do is cancel that auto-renew. So I go and there's a tick box. I had to sort of go to Google or chat GBT or something to find out how to do it. But then there is a tick box buried on the website. Went to ticket, i.e. or on ticket, auto-renew. No, you have to call us to do this. So then I call, 10, 15 minute waiting time.

36:16Can I just check, when you originally signed up, did you sign up online? I can't remember. I have this big issue, I think, and it's something we're campaigning on. You should always be able to cancel using the same mechanism that you signed up. But anyway, carry on. Well, then, you know, then it's a standard 10, 15 minute wait on the line. You know, cynically, you might think they just want me to give up, lose interest and forget all over again. Then finally get hold of somebody. And then obviously I'll get given the hard sell. But, but, and, you know, and hey, presto, it came down losing a quarter, and down to about a quarter of what I could have paid.

36:51But, you know, I think you might take the view, and others, that more fool me. And I'll take that point. I'll take that on the chin. But I take the view, that's just not cricket. That is just not cricket at that level, you know, four times more. That's just wrong. And, like, I reserve the right. Obviously, they're not having a penny of my money again, and that'll teach them. I'll bring them to their knees by not renewing, by not using them again. Just a couple of comments. Just as an aside, both AutoAid and Evershore charge about 60 quid a year for full service breakdown, cover HomeStart, onward travel and breakdown on the site.

37:28If you're going with the two or three letter named firms, which you all know what they are, then they both in our poll on haggling over 80 percent of people who try and haggle at renew will succeed with both those firms. It's the most haggleable sector. You should not be renewing without pushing your price down. and you were paying massively over the odds through what's called price walking, Adrian, basically where they walk your price up each year, step, step, step, so that eventually you're paying so much more than the existing customer. Whether it should happen or not, in insurance we have a rule that's sort of banned price walking, though it doesn't work that effectively because there's lots of ways around it.

38:04We've talked about that before. We don't have that rule on breakdown cover. Look, there's an argument here, if you ask me, that as it's you who is a clever, savvy man... Not in these matters. Well, you are. You used to present a business programme. You are a victim to the competitive market. But my concern is if this is you in 40 years' time when you don't have quite the same faculties that you do now and you're struggling, then I think then we're starting to, you know, that is taking advantage of people. I mean, it's a difficult one whether it should be allowed or not, but absolutely we all need...

38:40The truth is it is allowed, so you need to protect yourself. Shall I start with some of the ones you've got in? Can I just say, I think daylight is the best disinfectant. I'd like to see somewhere a league table, the naming of shaming, not necessarily of this particular company, I'm not casting a special thing because there's a lot to do it, but different companies in different areas, not just breakdown cover, you know, the worst offenders when it comes to this kind of thing. I think the way to do that is take the reverse of my poll on haggle success. If you're able to haggle at renewal, that means the price is flexible.

39:09But I want somebody who's not, when the default position isn't that I get legged over. Yeah, but you could still be just legged over, but they just charge everyone the same price. It doesn't work that way. I mean, ultimately, my entire career is about showing you how to do it the cheapest way. And that's the information that we provide. And so it is out there. All that info is out there. But the problem is on this, you didn't look. Yeah. Well, I kind of did, but it was stacked against me with the faff required in just taking out the auto-renew. That's what sort of got me. Yeah. Let's get on to...

39:46Aido says, My very unsavvy pensioner mum had car insurance that auto-renewed about seven years on the trot, meaning it ended up over£1 ,100. Once I discovered, I did a comparison site search, got it for£197. I was not happy to say the least. and told them so in no uncertain terms. Well, this is where it becomes a real problem, and that is market abuse. Yeah. Ian Dudley took out a 30-year life insurance policy about 25 years ago when I got married. Over the years, the cover has steadily increased, but so have the premiums. I just let it tick on. I was wanting my family to be safe if anything happened to me.

40:26After I started to listen to the podcast last year, I had a look on a comparison site and found I could get better cover for about a quarter of the price. When I multiply that by however many years it's been, since it would have been made sense to switch, it must have cost me many thousands. Huge chunk of life insurance policy costs, especially Term Insurance's Commission. Huge amount of it. Can be tens of thousands of pounds if it's quite an expensive policy. Jack Alvin. Years ago, I needed my boiler replaced and went with the company that serviced our system. They subcontracted to a local guy who would have been£1 ,500 cheaper.

40:57I'm still raging. Oh, yeah. I mean, Claire used to be a member of a book club. You thought, it's a gentler world, this, but years I bought books with them, happily paying the delivery costs. After probably 10 years, I decided to cancel my subscription. And when I rang them to cancel, they offered me free delivery from then on to stay with them. After being a regular customer for years without being offered that, I'm still fuming. I'm with you, Claire. Yeah. Heather, I recently helped. It's another similar one. I recently helped my pensioner family members move away from their provider after we were chatting about a bargain SIM-only deal I got, and I found out they were paying almost£60 a month.

41:34Wow. £60 a month, 720 quid a year for their two SIMs. One SIM only had three gig of data and was almost£30 a month. Wow. You can get that for two pounds. Two pounds a month, not£30. They carried on paying their direct debits each month. Needless to say, I've helped them both switch to another SIM-only provider and now only paying£8 a month for good data usage. Look, everyone, while we're on, just do a simple text, info, I-N-F-O-2-8-5-0-7-5. I do hope I've got that right. It should be free, and you will get back whether you're free to ditch, in most cases, some people ask for your date of birth for ID, in most cases, whether you're free to ditch and switch and move mobile contract provider.

42:14And if you are, it's worth going and check out if you can save some money. Shall we do a couple more, one more, and then we'll get to mastermind. TV subscriptions, this is a common one. saw our price gradually increase over five years to around£140 a month. We left for a week and rejoined as new customers for£45 a month. Oh, God, it annoys me. That's another one of the very high up the haggle list sectors in the haggle poll that we do, which says everything that you need to know. Now, to see if he will say everything that you need to know, let's play the theme tune.

42:52Welcome to Money Mastermind. Adrian, your score stands at 15 correct and 31 incorrect in this three option multiple choice quiz, which means you're doing N-B-R-C. No better than random chance. In fact, and I don't think we've been in this situation before, you are doing worse than random chance. I don't even have a sting made for that. I saw somebody I hadn't seen for a long time who said to me, in all seriousness, at a sort of family gathering the other day, said, you know that thing you do? I mean, you are, and she said this in all seriousness, she won't be funny. You're pretending to be that stupid, aren't you?

43:34You're deliberately getting them wrong, aren't you? And I went, yeah, yeah, yeah. I was too ashamed to admit, no, I'm trying my best. Oh, well, but do you know what? There is a lot of admiration out there that you put yourself through this each week. and many people would be in a similar boat. For my birthday, which is the 21st of March, it's a Saturday. On the Thursday before that, I am going to be asking you the mastermind question as your birthday present to me. I'm already working on it. It's a deal, Adrian. It's a deal. I will allow that to happen if I'm not off that week. I'll do it the following week if you are off or the week before.

44:12Anyway, go on. Anyway, Adrian, in an admirably self-aware attempt to upgrade your famously laconic on-air delivery, changing from quietly unimpressed to merely slightly amused, you have purchased a state-of-the-art tickle vest trademark. It's designed to sit under your shirt and give you gentle little strokes like an AI emotional support octopus. It costs around£100. You pay£10 on your credit card and the other£90 in cash. Sadly, before it arrives, the mighty... I can't say this. Giggle Jileko collapses into bankruptcy, disappearing like a fart in a stiff breeze. So, are you covered by Section 75 of the Consumer Credit Act?

45:02Remember, you paid£10 on the credit card, the other£90 in cash. A, yes, but only for the£10. B, yes, for the entire£100. or C, no, you're not covered under Section 75 of the Consumer Credit Act at all? OK, just do those to me again. A, you get£10 back because you put£10 on the credit card. B, you get all the money back even though you only put£10 on the credit card and it costs£100. Or C, you're not covered by Section 75. I think it's B. I think it's B, B, B, B, B, B. Can you tell us what Section 75 is? B, yes. Well, I don't think I could properly define it. It's what you get when you, if you buy something with a credit card, not a debit card, I don't think, but buy something with a credit card, then if something goes wrong with the purchase, then the credit card has the liability.

45:56Not bad. Under Section 75 of the Consumer Credit Act, if you buy something on a credit card, the credit card company has joint liability with the retailer. You have exactly the same rights with the credit card company as the retailer, but there are rules as to when it applies. OK. So, one of the most important rules is no matter how much that you put on the credit card, if it's a qualifying Section 75 purchase, the credit card company is liable for the entire amount. So, under the circumstance where you put a deposit on the credit card or you put a fractional payment on the credit card and it's a£1 ,000 item, a£10 ,000 item, as long as it's under£30 ,000, the credit card company is the entire amount.

46:35So under that, Adrian, B, where you said you put£10 on and the other£90 in cash, you get the£100 back, that would be correct. Go on. What now? What now? What have you dreamt of now? This is so mean of me. Because the rule of Section 75 is the item has to be between£100 and£30 ,000. You paid£100. technically section 75 only applies for things that cost 100 pounds and a penny or more so section 75 does not apply the correct answer is c no play the uh and that was a bit of a trick because because the 10 pound deposit i'd paid wasn't 100 no because the 100 pounds it needed to be 100 the item needed to cost over 100 pounds which is 100 pounds and a penny OK.

47:33I've got a serious question. The other day, something ordered something. It didn't arrive. It was more than, not much more, but more than£100. So I eerily said to my wife, so what are we going to do with Section 75 on that? And she said, how do you do that then? I said, I haven't got a clue. I know what it is, but I don't know how to clue to go about it. Well, I mean, on that, you might also do a chargeback because chargeback tends to, just, chargeback is where your card company asks the company who paid you for the money back because you didn't get delivery. and card firms are more keen to do that because your card firm isn't paying for it.

48:06So what do I, in that situation, what do I do? Tell them it happens, say I'd like to do a chargeback because I'll get my money because I didn't get delivery of this item and I shouldn't be paying for it. Now with a section 75, which comes in if the item was faulty or you did get delivery or the company's gone bust and there's certain reason the money can't be got there, you would then ask for a section 75. But I would tend to, my sort of rule is for ease, if it's covered by chargeback, ask them for a chargeback. If it's not covered by chargeback and it's on the credit card between£100 and£30 ,000, ask them for a Section 75 because they're less keen to do it and you might have to fight them and go to the ombudsman.

48:40So in your case, I'd be calling them up saying, I didn't get this delivery, I'd like my money back, I'd like you to do a chargeback and give me my money back, please. And that would work on a debit card as well. OK, I've got it. And they'll say, hang on, is that Adrian Childs? No, you're a clown. So you're definitely not having it. No, they won't. But they might say you're 4-0 down for the year, which isn't good.

49:01Hello everyone this is the pod only section now I just wanted to make a couple more quick points on that money mastermind. The first thing is you can sometimes do a section 75 claim on your app so you may be able to do it all online you can do it automatically it just depends on the credit card provider when you're doing it. The other thing is when we're talking about chargeback what I didn't get the chance to say is unlike section 75 where you spend any amount on the card and the card company is liable for the entire amount as long as the amount is between £100 and£30 ,000, that's fine Section 75.

49:38When you do a chargeback, which could be on a debit card or a credit card or a prepaid card for that matter, the card company is only liable for the amount paid on the card. So in the example I gave to Adrian, where the firm went bust, it wasn't eligible for Section 75, he'd put£10 on because it was just a little bit too small, the transaction He'd put£10 on the card and he'd put£100 on, it was a total payment. He would only be eligible for£10 back if he did a chargeback. He wouldn't get the whole£100 back. He'd have to try and see if he would be a creditor to the Giggle Gillet company, which unfortunately I think probably doesn't have very much money at all because those octopus tickling vests, they didn't sell well.

50:18Shame. Now, joining me is podcast producer Matt. Matt, I think we had a few more Lysa help to buy type questions out there. Shall we just finish those off? Yeah, shall we? We'll start with Sharon. She says, my son's just turned 18. Therefore, I've just transferred him his trust fund, which I've saved hard into. Do you recommend he withdraws it and puts it into a LISA? Well, I'm not sure what you've transferred the trust fund into. I'm presuming you've transferred it into a cash ISA, which would be the standard thing to do. As to whether he puts it in a lifetime ISA, depends. Is he very likely to be buying a first time buyer's property costing less than£450 ,000 in the next four or five years?

51:00If so, then putting it into a lifetime ICER is a good idea. If not, in that case, let's say he's going to be making a first time buyer purchase, but it's more than four or five years away. I would. It's very difficult. I might be tempted to see what this new product was when it launches in probably April 2028, because it may be better for him and not have the penalties. What I would definitely be doing is getting my pound in so you've got that Lysa facility open now, just in case anything changes in the meantime. So it's a hard one. If he's buying and looking to buy pretty imminently, yeah, use a Lysa.

51:32If you don't think he'll be buying his first property for another 10 years and you don't know the price of it, I probably wouldn't be putting lots of money in an ISA. I would be opening one with a pound so you've got the facility. But I wouldn't be putting lots of money in at the moment. I would be waiting to see what this consultation brings when it starts to come out. And Lisa, it's quite specific. Lisa's asking about Lysa? Lisa's asking about Lysa. Nice. She says, we're in our mid-50s. The husband has a first-time buyer's ISA at the maximum. He leaves the RAF in 2030 when he turns 60. We were hoping to buy a small bungalow with the ISA, my savings, and releasing some of his pension.

52:08Alongside his RAF payout, we would manage that. I really don't want to lose our government bonus, but heard it ends before 2030. Any advice? We don't want to end up homeless in our old age. Well, you are right. The Help to Buy ISA does have a time limit on it. I think you stop putting money in it by 2029 and it can be used until 2030, the bonus. That's where we are currently. I think you may be a beneficiary of this new situation. Obviously, if you buy a house before then, you just use it in the Help to Buy ISA. that the good thing about the help to buy ISA, unlike the lifetime ISA, is if you withdraw your money, while you won't get the government bonus, you will get all your money and your interest back.

52:49You won't be paying a withdrawal penalty. So what I think may happen in your case, guesswork, guesswork, guesswork, is you will probably be able to transfer your help to buy ISA into the new product. And therefore, whatever the rules of the new product are, you will then be able to do. I think that is 60 to 70 percent likely from what I'm hearing that they're going that will be where they consult. So it doesn't mean it will happen. I can't do any promises. But yes, otherwise, if that doesn't happen, well, you could simply withdraw your money from the help to buy ISA and put it into the new product.

53:22I've just thought of one one extra stumbling block. The help to buy ISA didn't have any time age limits. So anybody could get help to buy ISA of any age. The lifetime ISA was aged 18 to 40. they are discussing whether they should have age limits or not in the new product. I don't know where they'll go on that. So you may not be able to get the new product anyway. He was 59, wasn't he? Was that what it said? 2030 turned 60. So yeah, he's in his 50s. That may be a blocker here. So you might be just reliant on the help to buy and therefore you have to use it. There are a lot of ifs and buts in your case, I'm afraid.

54:03so if you're going to want to use it then you would need to use it to buy a house probably before i think it's november 2030 the rules could change when they do this consultation i think that's unlikely you may be able to get and move it across to the new product but it depends on whether they put an age limit in and whether they allow you to move it across so we are we are in a we are in quite uncertain territory for you i hope it gives you some clarity of at least what you should be looking at and thinking about though that seems a good place to me to end i think we've covered it in the main uh sorry i can't be more definite on lycer and help to buy but you know the rules are not out yet and i've just felt it was important to do this because i'm getting so many questions from people about what it means and what they should be doing i hope i've given you some way to try and navigate based on realistic probabilities of what is likely to happen but of course again my caveat we don't know and that's it for this week we tend to put out a new episode every Thursday and Monday, which is our Question Time podcast.

55:00There you can ask me absolutely anything and everything. And this week, tomorrow, we're putting a special student loan extra pod out too. Yes, three podcasts in the week. Who knew? That's a lot of pod. So if you want to make sure you don't miss out on any of them, why not subscribe? And then it will ping into the relevant app, online, email, or whatever forum you use for getting your podcasts. and you can listen until your heart, or at least your wallet, is content.

55:41Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing martinlewispodcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double-checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.