Question Time: Time to stop using my LISA? Are cashback & switch bonuses taxable? Are investments protected up to £85,000?

0:01It doesn't protect the underlying thing you are investing in. There is a plausible possibility that we will see a change to the lifetime ISA in the budget. I used to dance quite a lot, bizarrely. I used to probably go out and dance quite seriously. I think you've done everything you can possibly do. Hello and welcome to the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. This is our Question Time edition, in which I answer your questions about absolutely anything and everything within reason. This week, you ask me, are investments protected up to£85 ,000 per person per institution, just like savings?

0:41Should I stop putting money in my lifetime ISA because the property threshold is frozen? Do you pay tax on cash back on credit cards or cash back from bank switches? How do you get your money back on hotels after your flight's been cancelled? And what's my favourite type of music? Well, it's the theme tune, of course, so play it.

1:04So I'm going to work hard, hard and never lay I got a mouth, I got a fee So I'm going to make sure everybody eats Hello and welcome to the Question Time pod. Joining me is the curator of questions, which ever since I worked out what the acronym is, I'm now calling you every time, podcast producer Matt. Brilliant, thank you very much for that. I'm sure that's not going to stick and people aren't going to start shouting it at me. And maybe instead of addressing their questions to dear Matt, they can address it to C. No, no, absolutely not. Absolutely not. Putting my foot down there. Absolutely not.

1:41So, Matt, what questions have you chosen for me this week? What's your first one? Let's get straight into it. Let's get into it. Good one from Stuart to start with. He says, hello, Martin. Thanks so much for talking more about investing recently. I'm finding it very useful. You've often talked about the FSCS cover. Thank you. Cover for savings. should your provider go out of business? You've thrown me now. However, what is the position if you hold investments, such as a share ISA with a provider that goes insolvent? Are your investments protected under the same scheme? And what if your holdings exceed the 85k cap?

2:16OK. Well, look, that's a really interesting question because we've just learnt that the saving safety protection, that£85 ,000 per person per financial institution that you're protected on savings, is due to rise to£120 ,000 on the 1st of December, which is good news for savers. Now, with savings, it's pretty clear. You put your money away, you get deposit protection. That protection is backed up by the FSCS scheme, which is backed up by the government. So in the unlikely event the UK-regulated financial institution that you put money in goes bust, you get your money back up to that level. Though in reality, in savings, they would also probably take the savings book, the amount of savings that that company has and just move it to another institution.

2:58Investments, as far as I'm aware at the moment, that limit is staying at£85 ,000. But it's important to understand exactly what that£85 ,000 is covering. The most important thing to understand is it doesn't protect the underlying thing you are investing in. When you make an investment, what you are doing is taking a risk that to hopefully get higher growth than you would get in savings, you're willing to lose some or all of your money. Now, most people are investing in funds unless they're specialised investors and a fund has a broad spread investment, so you're unlikely to lose all of your money even if things drop because that's the point of not having all your eggs in one basket.

3:38But let's take the example of you investing in an individual share. You buy a share in the company. That means you're a part owner in that company. You gain if the share price goes up because other people are willing to pay more for it because the company becomes more valuable. You also gain if you were to get dividends. That's an income payment per share from the company. But the price of that is the investment risk. And just as if you set up your own company and it went bust, you would lose all your money. If you've got a share in a company as a part owner, if it went bust, you would lose all your money.

4:10So that isn't what the FSCS is protecting. what it's protecting you from is if the investment platform you invested through were to go bust. So they can't accept any claims for poor investment performance, but they may be able to protect you if a provider, a platform goes out of business and there's a shortfall in the money or the assets that it's holding for you. And that limit is currently£85 ,000 per person per firm. I'm not, Don't think that that is changing. I will double check afterwards. Of course, it has to be a UK regulated investment firm. If your claim is about bad advice, the FSCS may cover you too.

4:53But just to be plain, if you have a complaint about bad advice and it's ruled that you were given bad advice, the firm would have to pay you. The FSCS would probably cover you if the firm that you complained to had gone bust and it owed you money as compensation for bad advice. So that's the type of thing that we're talking about. I mean, the truth is, as long as you're investing through a UK regulated platform, you should hold and you should be the owner of the underlying assets anyway. So the real problem is often if you're struggling to get those assets back, if it were to go bust, that you would be protected.

5:23But it's meant to give you some extra certainty about the platform going bust, not the investment itself. A little bit long winded, but I think we got there. Right, Matt, I'm done on that one. And you're about to bring me the second one. and under the curator of questions format that I know you like to use, I think that means this is a caller. It is. We need to get rid of this curator of questions. No, it's sticking. I think it needs to go. It's sticking. We could do a poll on it. Yeah, do a poll and see what people think. All right, we've got Theo in East London. He's on the line. Hi, Theo. Hi, Theo.

5:55Hi, Martin. Hi, Matt. Can I just ask you, Theo, what do you think of calling Matt the curator of questions? Are you in favour or against? I think I'm going to have to be in favour. Oh, Theo. sorry mate right what's your question okay so i've got another lifetime isa question this time specifically london related yeah so for context i've had a lisa for the last three years and i've been prioritizing maxing that out the kind of 4k contribution limit and then any leftover is going maybe another isa's or any savings accounts so i think the goal here really is I do need to have a deposit for a flat in London together with my partner and maybe in three years or so I'll have you know a bit of a wage increase and then club together a deposit to actually put something down yeah um so yeah I'll decide to sell in London primarily because we both grew up in family of family are close by but if it doesn't add if it doesn't add up then we will absolutely have to rethink so with with the lice of the maximum property price I can get is 450 000 and that's only in london and i don't think that aligns too well with the current flat prices um so i think it was maybe it was right move that reported that the average london flat sold last year was 530 grand yeah so there's still plenty of flats below that threshold but i'm more concerned about what the picture is going to look like in a couple of years time so with that my question is a two-parter it's really should i continue contributing to my lyser first and foremost?

7:30Or shall I opt for just kind of more general ISA or other savings options, which don't really have this risk of the 450 grand limit? And then secondly, based on that, should my partner open a ISA? Is it still a good option? So it's a really interesting timing of this question. Absolutely, I would not be putting another penny into a lifetime ISA until this Wednesday, Because I would say I think there is a plausible possibility that we will see a change to the lifetime ISA in the budget, which is on Wednesday. Now, I gave evidence to the Treasury Select Committee talking about lifetime ISAs earlier in the year.

8:14They have reported to the Chancellor that they think there are some fundamental problems in the lifetime ISA. One of them is that the threshold has not been increased since 2017, even though house prices have gone up. So on the back of that and on the back of the lobbying work that I've been doing, I think there is I'm going to put it at 50 50. I think there's 50 50 chance one of two things will happen in the budget this year. either the chancellor will follow my recommendation which i would like a two which is that if you buy a property above 450 000 pounds then the penalty for withdrawing your money um that you normally pay if you take your money out for not buying a quality owned property you won't pay the penalty so you'll be able to get your money back you won't get the bonus but you'll be able to get your money back and that's my suggestion which would be a relief to you wouldn't it yeah i mean it's not what you want you'd prefer to get the bonus but at least not to lose any money would be a relief and you'd still get the any interest that you had earned exactly the alternative is that she puts the threshold up now i probably think there's more chance of that maybe it going up to 500 550 600 i think there's probably more chance of that just because it's simpler you know you can do that at the stroke of a pen you can change the limit whereas changing the penalty is slightly more technical or you never know we could be super lucky and get both uh unlikely but hey we can always hope so the first thing i'd say is let don't do anything now because i think you know i'm not saying it will change i'm not privy to that information but i think it is it is strongly possible that something happens more than plausible it's definitely possible it's plausible but i'm not saying it will happen and so if we take it as if it does go up to 550 let's say just you know plug put the middle one out of the three um then i think that probably gives you more room and gives your partner more room.

10:05Now, look, no one can predict house prices over the next three years, but no one is currently looking at huge rapid house price inflation. Even if there is house price inflation, we're probably looking at the low digit single percents rather than anything bigger. So you're not going to see too much price difference. We've already had that baked into the London market and London is moving up slower than anywhere else. So if that were to happen, I think then I would probably still go for your license because you sound like someone who will be able to find a house under 550 quid that's pretty reasonable you maybe go you move out a zone or two and you still get something if it doesn't happen and we're still stuck at 450 with nothing else coming in then i think you're right that the conservative thing for you to do is to say you know what i can't afford to put any more money in lysis if i'm going to have to pay a penalty on it and that my my uh i don't know your partner whether girlfriend or boyfriend whatever um yeah uh that that they probably shouldn't be putting money in a lisa right now because there's too big a risk you're going to buy property over the threshold and that by the way when I have and I think I'm allowed to say this when I have spoken to the chancellor in person about this and when the answer that often comes back from politicians is yes but it's a lot of money for 50 ,000 is that who we want to help the biggest thing I say is you have to understand this is a deterrent and it's not just a deterrent to people like you who are close to it It's a deterrent right across, especially people from lower social economic barriers, who that when you say there's a risk, you know, because I have to caveat, you've heard me, I know you've, and I'm glad you've got the message, you understand it.

11:39You hear me, I have to caveat. When I say, I can't say a license is a no-brainer because there's a risk, even if you're going to buy a property, you'll lose your money. And that puts so many people off. That's why my argument is you have to change the structure or you're actually unnecessarily putting risk-averse people off doing it. So let's, fingers crossed, something will change. Have I answered all your questions? sorry I went off on one sorry yeah no super helpful so really sit tight Wednesday let's see what happens and then actually for the moment that will really affect whether yeah it's worth it going forward and definitely kind of a pause on my partner opening one yeah unless they put the barrier up in which case go for it yeah okay no super helpful Martin thanks Matt cheers mate well done cheers

12:21one more thing to add in Theo's gone but worth remembering on lifetime ICES you can only get the bonus if you've had it open a year. So for his girlfriend, it was a girlfriend, wasn't it? I think I did call him and I think he said girlfriend. I don't. Yeah, I'm going to say girlfriend. So for his girlfriend, the key is she won't be able to buy within the first year. Actually, if you're listening to Theo's girlfriend, as you probably are back on the podcast, just go and put a quid in a lifetime ISA now. You put a quid in a lifetime ISA, then you started the clock ticking anyway for that year, even if you don't put any more money in.

12:50And if you aren't going to use it and you take it out, well, yes, you'll have to pay an effective 6.25 % penalty. But you know what? I believe you can afford the risk of six and a quarter pence. So put a quid in now, whatever, just to get that clock ticking. Are you sitting there thinking, oh, I know what I wanted to ask him? Well, this is your opportunity. If you've got a question, then just send them in to martinlewispodcast at bbc.co.uk. And please do start them, dear Martin. No, dear Matt. Dear Martin. Dear Matt. right Matt what do you have next for me a question from Dan who's emailed into the podcast martinlewispodcast at bbc.co.uk if you didn't know I like the way he started his email he said dear Martin and then in brackets and he who shall not be named which I think you called me in a previous episode didn't you well done Dan I'm going to give you the best answer I can possibly give you that's it put Matt in his place the curator of questions himself rude let me read his email.

13:50A number of bank accounts offer cash back on groceries, bills, etc. Does this cash back count as interest for the purposes of tax? Started listening to the pod this year and now regular. Well done. I thought you were going to say something more. Thanks for all the hard work you do. You've already saved me loads of money. Oh, well, that's very kind of you, Dan. It's a really good question. Not enough people ask it, but there's a good answer. No is the answer. Cash back does not count as interest. Interestingly, if you do a bank switch, which that does not count as interest. They count as rebates or discounts, and therefore they are not taxable income, and you can have all the money tax-free, and you do not need to declare them.

14:30It's actually, if I can get super nerdy for a second, there are some bank accounts that have deals like, you must pay us a£3 monthly fee, and we give you£5 back. And I believe that is probably done so that there is clarity that that is a rebate. Because, of course, if you pay a£3 monthly fee and you get£5 back, then you're£2 up and therefore you're gaining£2. And one of the reasons I suspect it's structured that way is so that that is seen as a rebate on what you've paid and therefore is non-taxable income. So, Dan, rest assured, you are absolutely fine to get as much cash back as you like or bank switching bonuses as you like and you do not have to tell HMRC.

15:14It's none of their business because it's not taxable income. All right, now, Matt, at this point, because I have understood your structure, we go question, caller, question, Matt's funny question from a listener. Is it funny question from a listener time? It's not funny question from a listener. It's funny slash question that I want to ask you question. You're building your role, mate. I know. Well, it's because a lot of them are about food and I don't always want to talk about food. I want to get to know you a bit more. I want to understand you as a person, not just as a money-saving expert, but as a person.

15:51So what kind of music are you into and what song is at the top of your on-repeat at the moment? Okay. Now, there will be some people out there who are substantially older than you, Matt, and will know that back in probably 2003, they did a week on Radio 2 when I used to appear on the Vine programme on Radio 2. dedicated to people choosing what music I should listen to as I don't listen to music. So, I don't really have an answer. And at the end of it, it was like people had to choose. If you were going to buy me one song to start off my music collection, it obviously became a hotly contested debate by all these musical people.

16:37I mean, there's a reason I do Radio 1, Radio 5. It doesn't have music on it, right? And they came up with it. It was actually Somewhere Over the Rainbow by Judy Garland, which is quite interestingly something that my daughter now sings incredibly beautifully. So that does have real meaning to me. I'm not a music atheist. I'm a music agnostic. I don't mind music being on. I quite enjoy music being on. And I used to dance quite a lot, bizarrely. I used to probably go out and dance quite seriously. And I enjoyed the rhythm, but I never put music on. When I wake up in the morning, I put speech radio, generally five live on.

17:13That's what I like to listen to. that's mine. I've got Claire who's one of my team sitting in here she's giving me a funny look. You give me a dirty look Claire is it just weird? Confused. She's surprised and confused. So I don't really have a playlist or most of the stuff I do. My daughter's very into musical theatre and I hope I'm not giving away she has an incredible voice. We don't know where it's come from. She's an amazing singer. So I tend to, the things that I'm listening to at the moment will tend to be things that she is singing. But generally music does pass me by a little bit. Interesting.

17:42and interesting. So the funniest is I did Desert Island Discs. Oh, God. And of course I had to pick Desert Island Discs. And I remember saying to my wife, what am I going to pick? What are the songs that really you love most? And so in the end I did it differently. I picked by songs that were sort of thematic to my life as I'd gone through it, that reminded me of a point in time that I was going to be talking about. You've always got to be awkward, haven't you? I have. And I believe that also on BBC Sounds people can go and listen to that Desert Island disc if they'd like to. Look at me cross-plugging the BBC.

18:15Well done.

18:19I believe we've got a caller now, have we? We do, we do. We have Mark. Mark's in Dorset. Hi, Mark. Hello. Hello. Is that Matt? It is. And this is Martin. Hello. Oh, hello, Martin. Nice of you to be there. Do you know what? I'm off from here. It's my podcast. What can I do for you, mate? I have a problem with a holiday. Yeah. That we booked to go on independently. So not through any sort of travel agents. So you booked the flights and accommodations separately and paid for them on a piece of plastic, yeah? Correct, yes. So that was back in September. We booked the flights in February, I think it was.

19:00And it was our 30th wedding anniversary. So we thought we'd put the boat out and go for a, thank you, a two-centre holiday in Athens and a Greek island. Nice. And we arrived at the airport on the night before because it's quite a journey from here to Bristol Airport. If you've got a six o 'clock flight, you need to be leaving here at half one in the morning. So we thought we'd stay over. And when we got up, we'd received a text message from EasyJet to tell us that our flight had been cancelled. And what did we want to do? um being 3 30 in the morning we weren't quite as with it as we thought we probably could have been but i present good morning britain sometimes that's when i get up i'm never with it at that time in the morning that is an early start um so uh we decided that because there weren't any more flights from bristol to athens for two days uh that we would cancel and abandon the holiday cancel the flights, get the money back, claim the compensation and go and have a nice little tour around the southwest down in Dartmouth and a couple of days in Wales just to carry on with our plans for our wedding anniversary.

20:13So, OK, so as I understand, you use UK Regulation 261-2004 which is the flight delay compensation and you've got your fixed amount of compensation on top of your refund per person. So probably about 200 quid per person on top, is that correct? It's 350 because it's over 1 ,500 kilometres. OK, so you've got 700 quid on top of the flight. Well done. I'm slightly concerned because I was expecting this to be a flight delay cancellation. So I was going to go through the cancellation rules and say they cancelled it within 14 days of you travelling. And you would have got there over three hours late.

20:48Therefore, you're entitled to the fixed compensation. But you're ahead of me. And that makes me slightly nervous because it means the question is going to be more difficult. Carry on. It is going to be a little more complicated. When we returned, we had already booked our travel insurance at the time of the other bookings as recommended by you. Yeah, you got as soon as you book ASAB, you got your travel insurance doing everything right. It's getting more and more concerning for me. we then contacted the travel agent sorry the insurance company who told us that because the flight had been cancelled by the airline and there was a clause in the insurance they would not pay anything out to us yeah is that a normal situation yeah I mean generally airline failure is one of the things that some travel insurance policies are specific that they do not cover right and there are add-ons where you buy extra airline failure cover now we're in an interesting position here because we're talking the knock-on effects you're not asking them to cover the airline you're asking them to cover the consequential loss is what a lawyer would call it, of you not going on the flight.

22:14That would depend on the policy and the policy terms. Have you interrogated those policy terms? No, because we sort of accepted that they had a clause that said if the flight was cancelled by the airline then they were not responsible for any further losses as far as I remember. I'll tell you what I would do. I'll give you a quick tip. I don't know. How tech savvy are you? Yeah, I'm very sex-heavy. Perfect. I would go, I would get the policy terms and conditions, and it'll be long, it'll be 7 million pages long type thing, cut and paste that into an AI chatbot, like a ChatGPT or a Google Gemini.

22:57Okay. And then I would say, here is my policy, can you tell me what it says about this circumstance? Get it to super quick read it for you and bring out the relevant paragraphs so you can have a read of those. Just to check what the wording is. Certainly. My suspicion is, look, we never know, and you always have a right to take any travel insurance case to the ombudsman. My suspicion is that they're going to be right. Yes. But I think it's worth the five minutes just to read that wording. I presume you're also thinking of Section 75, are you? Because I reckon already I'm not going to be telling you anything that you don't know on this.

23:38Yes, since that happened and we've tried to claim some extra things from EasyJet and that didn't work, we have contacted our credit card company and had a reply today saying, yes, please send us all the relevant information and we'll look at it. My concern is that the booking was with booking.com rather than the hotel itself. yeah and that's an intermediary that will probably break in section 75 i have another concern i'm sorry to be negative right my other concern is you know i often phrase it this way and you're a sophisticated man but i'm going to use my same phrasing because it makes it clear for everybody listening people often say to me i you know if i can't go on a flight or i can't go and why can't i get my money back and i say it's a bit like if you buy a tennis racket and you break your arm you You can't claim the tennis racket is faulty.

24:31The problem is the hotel was there for you. You couldn't get to the hotel, not that there was anything wrong with the hotel. And that's where it gets tricky. And under Section 75, the credit card company is jointly liable with the retailer. We ignore the potential intermediary breakdown of the fact that you went through an agent and that could stop Section 75. But you don't really have any consumer rights with the hotel. So you wouldn't have any consumer rights with the credit card company either because it's a mirror right situation. So I think that is unlikely to help, but I would try it anyway, is my own stance.

25:08By the way, just thinking back, I said scheduled airline failure earlier. It's actually travel disruption cover in this particular one. Scheduled airline is where the airline goes bust. Travel disruption is where you have travel disruption from an airline not delivering. So it would be the travel disruption part of your policy that's actually relevant. Look, this sounds really weird. when when I haven't managed to help you but if I can the one thing I think I might be able to do because I sort of I think you seem a similar person to me Mark I think you've done everything you can possibly do and I hope that me saying that to you gives you at least some peace of mind that you've tried everything because that's probably the best I can do if that makes sense that's absolutely fine that's all I could really wish for isn't it yeah you've done everything you can do you've got seven you know you've got 700 pounds back due to the compensation so that should hopefully limit the the total amount that you are out of cost but you've tried everything and then just you know it's a bit of a you know stuff happens yeah absolutely eventually it comes around yes take care and i'm glad you enjoyed your lovely uk holiday instead sounds it was like it was beautiful thank you very much all of you cheers cheers thank you so look mark was very knowledgeable about all those issues but just for those people who aren't if ever your flight is delayed or cancelled and it is an eu or uk regulated flight what does that mean that means any flight leaving a uk or eu airport or any flight arriving at a uk or eu airport but on the second one if it's arriving then it has to be a UK or EU airline then there is a fixed compensation scheme and that's what Mark got if your flight was delayed usually over three hours and the max exact amount you get paid depends on how far you're traveling and exactly how long you're delayed or it was cancelled in a relatively short time before you were to go away and the replacement flight you were offered even if you didn't take it the replacement flight you had offered would have meant that you arrived delayed compared to your original booking, then there is fixed compensation available, provided it's the airline's fault.

27:19To make that very simple for you, if it's due to a storm and it was not safe that they couldn't fly or that the airport is closed down, it's not the airline's fault. If they didn't have the staff or they had a knock-on delay and it was late, the prior flight was late getting in so they didn't have the plane, then it's probably the airline's fault. And so what you just need to know is you need to have that in your head in case it happens to you. That's the point you go and check the rules because as well as your money back if you ask for it you might be entitled to£200,£300, £400 per person fixed compensation.

27:52That's it for this week's question time. Don't forget to subscribe so you know when we release a new episode. We put out a new question time each Monday alongside the regular podcast that goes on Thursdays. Aren't you lucky? Two doses of money saving tips and tricks a week. Do make sure you send in any questions you want to ask me to martinlewispodcast at bbc.co.uk.

28:30Martin 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.