Money saving expert Martin Lewis has issued an urgent warning to Britons aged 18 to 39, urging them to open a Lifetime ISA (LISA) with as little as £1 to safeguard access before potential government reforms close the account to new applicants.
Why Open a LISA Now?
In a video shared on social media, the founder of MoneySavingExpert.com explained that while the government is consulting on replacing the LISA with a new first-time buyers ISA, those who already hold a LISA would be allowed to continue using it. Opening one now, even with a minimal deposit, could preserve the ability to benefit from the account's unique 25% government bonus.
Lewis stated: "This is an important warning for anybody aged 18 to 39. If you do not have a Lifetime ISA, get a pound in one now."
How the Lifetime ISA Works
The Lifetime ISA allows savers to contribute up to £4,000 per tax year, with the government adding a 25% bonus worth up to £1,000 annually. The funds can be used either towards purchasing a first home valued at up to £450,000 or withdrawn from age 60 for retirement. Withdrawals for other purposes typically incur a government charge unless an exception applies.
Lewis highlighted the account's benefits: "The LISA is a strange savings account that gives you a 25% boost. You can put up to £4,000 a year in it and the state will add a grand."
Potential Government Reforms
The government is currently consulting on replacing the Lifetime ISA with a new first-time buyers ISA. Lewis warned that if this reform proceeds, the existing LISA would likely be closed to new applicants. However, existing account holders would retain access. He added: "When they do, they'll close the ISA down to new applicants. However, if you've already got one open, even with just a quid, you can continue to use it."
He also noted a potential advantage: under the proposed changes, first-time buyers could potentially benefit from both a LISA and the new first-time buyer ISA simultaneously. For retirement savings, however, there would be no equivalent product.
Who Can Open a Lifetime ISA?
Anyone aged 18 to 39 can open a Lifetime ISA. Lewis emphasised that while a LISA is not typically the best option for retirement savings compared to a workplace pension, it can be advantageous in certain circumstances, such as for those who can no longer contribute to a workplace pension or for self-employed basic rate taxpayers.
He concluded: "We don't know what you'll be in 10 years' time, but putting a pound in now means you'll have the facility to use it in 10 years' time if you need it."
