Martin Lewis has issued an urgent call for adults aged between 18 and 39 to deposit £1 into a Lifetime Individual Savings Account (LISA) before the product is scrapped next April. The money-saving expert warned that time is running out to open the account, which offers a 25% government bonus on contributions.
Why Open a LISA Now?
Speaking on his podcast, Lewis explained that the LISA allows savers to contribute up to £4,000 annually until age 50, with the government adding a 25% bonus (up to £1,000 per year). The funds can be used to buy a first home (up to £450,000) or accessed after age 60 or in cases of terminal illness. However, withdrawals for other purposes incur a 25% penalty.
The government plans to replace the LISA with a new First-Time Buyer ISA (FTB ISA) from April 2027. Once the replacement is launched, LISAs will be closed to new applicants. However, those who already hold a LISA—even with just £1—can continue contributing and benefiting from the bonus.
Lewis said: "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. That's because the LISA is a strange savings account that gives you a 25 per cent boost. You can put up to £4,000 a year in it and the state'll add a grand, either to use towards your first property, as long as it costs under £450,000, or to use towards retirement savings once you're age 60."
Why Is the LISA Being Scrapped?
Critics have long complained about the LISA's complexity, as it combines a home-buying tool with a retirement savings vehicle. A key issue is the £450,000 property price cap, which has not been updated since 2017. In London, the average first-time buyer now pays £463,000, meaning many savers face a 25% penalty to access their funds. According to the BBC, in 2024/25, approximately 87,250 people made authorised withdrawals for a property purchase, while 129,200 made unauthorised withdrawals.
What Is the First-Time Buyer ISA?
The FTB ISA will be exclusive to first-time buyers purchasing with a mortgage. It will offer a tax-free government bonus, but unlike the LISA, the bonus will be credited only when the holder is ready to buy a home—removing withdrawal penalties. The bonus will be calculated on net contributions (excluding investment growth).
Rachel Vahey, head of public policy at AJ Bell, said: "Moving away from an upfront bonus should make the system simpler. Paying the bonus only when someone buys their first home removes the need to claw money back through a withdrawal charge if the savings are used in a different way. But this simplicity comes at a cost. Savers will lose out on the investment growth they could have earned on the bonus while building up their deposit."
Key Differences and Rules
The FTB ISA has no upper age limit and contributions count toward the £20,000 annual ISA allowance. Account holders cannot transfer between a LISA and FTB ISA, but can use funds from both for a deposit. The FTB ISA offers cash and stocks & shares options; transfers from stocks & shares to cash are not allowed, but the reverse is permitted. Savers can also move money from FTB ISAs into a standard stocks & shares ISA, but not into a standard cash ISA.
Additionally, from April 2027, interest earned on cash held within a standard Stocks and Shares ISA will be taxed at 22%.
