MARTIN Lewis has issued an urgent ISA warning ahead of a huge change coming in days.
The consumer expert has urged anyone aged 16 or 17 to put just £1 into a savings account before next week.
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From April 6, the minimum age you have to be to get a cash ISA is rising from 16 to 18 years old.
An ISA (individual savings account) is a type of savings account where you can save up to £20,000 each year tax-free – and some of them even offer free cash top-ups too.
Each year, everyone over the age of 16 gets an ISA allowance, which lets them save their cash tax-free.
Although this is changing from next week Martin explained.
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He said: “From April 6, the min age to get a cash ISA rises from 16 to 18 – though in reality, many ISAs are already only open to over 18s.”
There is an exception to this though, and that’s Virgin Money‘s easy-access ISA.
It pays 5.01% and can be opened and managed online, though you can only withdraw three times a year.
Bear in mind as well that the rate drops to 2% from the fourth withdrawal onwards.
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Martin says it’s a good idea for 16 and 17-year-olds to open an account ahead of the deadline, even if you’re not likely to max out the £20,000 limit.
He said: “So consider adding £1 now, as once open you’ll still be able to contribute £20,000 a year to it over the next two years.
“And while pointless for many, just in case you come into big money so that your savings would be taxed, it keeps the option open and you don’t lose anything by doing it.”
The expert also revealed that the ISA deal is currently better than the top easy-access normal savings account.
What other deals are out there?
It’s worth noting that there are better rates on offer currently, but Virgin‘s is the best one offering it to 16-year-olds until next week.
Easy-access cash ISAs let you take out your money when you want, without paying a penalty – so they’re a good option if you know you’ll be dipping into your savings.
But if you’re unlikely to need access in the short term, consider a fixed-rate ISA – many of these pay more and still let you withdraw but for a fee.
Martin Lewis‘ Money Saving Expert website has revealed the best options for other easy-access accounts to rival Virgin.
App-based bank Plum recently launched an account that pays the top rate of 5.15%.
It’s worth noting that the 5.15% rate includes a one-off bonus of 0.86% that drops off after 12 months.
After this, the rate is set to drop to 4.29%.
Set a reminder for one year’s time to check if you can get a better rate when the bonus disappears.
Plum customers with at least £100 to save can apply to open an account and get the 5.15% rate.
Or you can start saving into the ISA with £1 but you will get a reduced interest rate of 3%,
It only allows a maximum of three withdrawals a year, after which the rate drops to 3%.
Anyone over 18 can apply to become a customer.
If you know you’ll need more access to your savings, Chip pays 5.1% with no restrictions on how much you withdraw.
The account can be opened and managed using the provider’s app and new and existing customers can get started with just £1.
Withdrawals are allowed at any time without penalty, and its flexible ISA nature allows funds to be replaced without impacting the annual ISA allowance.
However, the account does not allow transfers, which means savers are not able to move funds held in other ISAs into the account.
You must be at least 18 years old to open the account.
For the top online account with unlimited withdrawals. Charter Savings Bank account pays 5.01% and allows you to withdraw as many times as you like. The account can be opened online with £5,000 or more.
Charter Savings Bank account pays 5.01% and allows you to withdraw as many times as you like, according to MSE.
The account can be opened online but you need to deposit £5,000 or more.
You must be 18 or over to open this ISA.
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How you can find the best savings rates
If you are trying to find the best savings rate there are websites you can use that can show you the best rates available.
Doing some research on websites such as MoneyFacts and price comparison sites including Compare the Market and Go Compare will quickly show you what’s out there.
These websites let you tailor your searches to an account type that suits you.
There are three types of savings accounts fixed, easy access, and regular saver.
A fixed-rate savings account offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw but it comes with a hefty fee.
An easy-access account does what it says on the tin and usually allow unlimited cash withdrawals.
These accounts do tend to come with lower returns but are a good option if you want the freedom to move your money without being charged a penalty fee.
Lastly is a regular saver account, these accounts generate decent returns but only on the basis that you pay a set amount in each month.
Meanwhile, there are several traps and mistakes you need to avoid ahead of a “confusing” savings deadline coming up.
Plus, the eight easy moves to make before the tax year ends or miss out.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories.
