Financial journalist Martin Lewis has issued an urgent warning to British citizens aged between 18 and 39, strongly advising them to establish a Lifetime ISA (LISA) account immediately to secure valuable government benefits before the scheme undergoes significant changes.
Why the Lifetime ISA Matters Now
In the most recent episode of his widely followed BBC podcast, Lewis emphasised that individuals can initiate a Lifetime ISA with a minimal deposit of just £1. This accessible entry point belies the substantial financial advantages available through the scheme, which permits annual contributions of up to £4,000 until the account holder reaches age 50.
The Government Bonus Explained
The cornerstone of the Lifetime ISA's appeal is the government's generous 25% bonus added to all contributions, capped at the £4,000 annual limit. This means savers could receive up to £1,000 in free government money each year they maximise their contributions, creating a powerful savings accelerator for both property purchase and retirement planning.
Imminent Scheme Replacement
Lewis revealed that the government has announced plans to replace the Lifetime ISA with a new first-time buyer savings product, expected to launch around April 2028. While details remain unclear about the replacement scheme, Lewis anticipates it will be "a relatively simple product where you save in it and you get a bonus" but with a crucial difference: "unlike the Lifetime ISA, you won't be able to use it to save for your older age savings once you're aged over 60."
The Critical One-Year Rule
The money expert outlined two compelling reasons for immediate action, even with the scheme's eventual replacement looming. Firstly, Lifetime ISAs require accounts to be open for at least twelve months before the government bonus can be accessed for a first property purchase under £450,000. "Getting a pound in means it's open and then you have the facility available if you need it," Lewis explained. "So if in a year's time you suddenly were in a position you could buy a house, you could dunk £4,000 in the Lifetime ISA and get the £1,000 bonus and use it then, because it's been open a year."
Dual-Purpose Savings Vehicle
The second advantage Lewis highlighted is the Lifetime ISA's flexibility as both a first-time buyer tool and a retirement savings vehicle. While acknowledging that workplace pensions typically offer superior benefits due to employer contributions, he noted that "the LISA can be a useful facility in some circumstances." For the minimal cost of £1, individuals secure optionality for future financial planning.
Minimal Risk, Substantial Potential Reward
Lewis addressed potential concerns about the scheme's future viability directly: "Now, I don't even know if you will still be able to use it to save for retirement once they introduce a new product, but it's possible you may be." He emphasised the low-risk nature of the recommendation, pointing out that "putting a quid in a savings product is not a particularly big cost to give you the facility in case you need it in the future" and that withdrawing the pound would incur only a 6.25% penalty, amounting to a mere six pence loss.
Accessing Your Funds
Lifetime ISA funds can only be withdrawn without penalty under specific circumstances:
- Purchasing your first home
- Reaching age 60 or older
- Being diagnosed as terminally ill with less than twelve months to live
Lewis's message to the 18-39 age group is unequivocal: "If your age is between 18 and 40 and you do not have a Lifetime ISA or a Help to Buy ISA, I would suggest you open one and put a pound in one now." This strategic move ensures access to valuable government bonuses and financial flexibility during a period of significant transition in first-time buyer support schemes.
