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New ISA is a step forward but ‘more needed’

Help to Buy logo - govtHelp to Buy ISAs are a step in the right direction, but much more must be done to help ‘Generation Rent’ take their first step on the property ladder, says a financial planner.

First-time buyers can save up to £200 per month and the government will add 25% on top of the savings. Savers need to save at least £1,600 to get the minimum bonus of £400. The maximum savings that qualify for the bonus is £12,000, meaning £3,000 for five years of saving.

Two weeks ahead of the their introduction, Kevin White, head of financial planning at deVere United Kingdom, says: “In effect, it is free cash from the government and anyone who is aspiring to buy their first home would be mad not to do this.

“The overwhelming majority of Britons dream of owning their own home and this is a hugely positive step in the right direction to help people get on the property ladder.

“However, even with the maximum HISA saving plus the government bonus, meaning a total of £15,000, most first time buyers will still find that they’re £15,000 short for the average deposit.”

He adds: “With this in mind, much more must be done to help Generation Rent achieve their financial goals.  Too many people in their 20s and 30s are desperately keen to leave their rented accommodation and/or their parents’ home and to buy a place of their own but simply can’t afford to do so.

“Therefore, it is imperative the government, the financial services industry and consumer groups unite to reignite the savings culture.  Saving must once again become Britain’s social norm.

Mr White says there are three things the government could do.

“First, we would urge the government to create a comprehensive savings charter.  Government needs to make saving worthwhile by, for instance, offering more proper incentives, such as the HISA, and reversing existing and planned tax raids on pensions.

“Second, the financial services sector could do more to help people get more from their savings. For example, it could make it easier to switch bank accounts, and also develop new, accessible and simple-to-use financial products and solutions to give today’s young people more options.

“And third, we need the government, the industry and consumer to work more cohesively to educate people on the real importance of saving.  We need to highlight the value of long-term security over short-term gratification.”

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