Millions of young adults across the UK are failing to claim what amounts to free money from the government, with research revealing a collective loss of billions of pounds over the past year.
The £3.1 Billion Savings Gap
A study commissioned by the money app Plum has uncovered a startling financial oversight among 18 to 28 year olds. The research indicates that this demographic could have collectively earned more than £3.1 billion in the last 12 months alone by utilising one specific government-backed savings product.
The missed opportunity centres on the Lifetime ISA (LISA), a savings account designed to help younger people get onto the property ladder or build a retirement fund. Despite its benefits, only 35 per cent of eligible young adults have opened an account, leaving a significant 65% without access to its advantages.
How the Lifetime ISA Works
The scheme is straightforward: for every pound you save, the government adds a 25 per cent bonus. This bonus is capped at a maximum of £1,000 per tax year, which is achieved by saving the full annual LISA allowance of £4,000.
The analysis shows that while young adults in this age bracket are still managing to save an average of £2,059 annually, their failure to use a LISA means they are each missing out on an average of £512.77 in free government money every year.
The Power of Starting Early
The long-term potential of the LISA is even more compelling. If an individual opened an account at age 18 and contributed the maximum £4,000 each year, they could accumulate as much as £32,000 in government bonuses by the time they reach 50.
Rajan Lakhani, head of money at Plum, emphasised the importance of acting sooner rather than later. "There is a lot to know about personal finances, but a LISA isn't something you want to ignore," he said. "It's one of those things where the longer you leave it, the earlier you'll probably wish you'd have got one."
Lakhani acknowledged that the money is not completely free, as it requires some effort to set up the account and the funds are ring-fenced for a first home purchase or retirement. However, he stressed that the rewards significantly outweigh the effort involved.
He also offered a warning from the perspective of time. "When you're in your 20s, it can feel as though you have your whole life ahead of you to get on top of your savings," Lakhani added. "But anyone who's in their 40s now will tell you, those years go pretty fast and you'll wish you had started earlier. Good saving habits in your 20s and 30s can have a huge impact on your quality of life when you get older."
The message from financial experts is clear: for eligible young adults in Britain, engaging with the Lifetime ISA scheme represents a critical and relatively simple step towards securing their financial future, with substantial government support on offer for those who take action.
