Martin Lewis has responded to criticism of his advice on Lifetime ISAs (LISAs), urging everyone aged 18-39 to open one and deposit just £1. The money-saving expert posted a video on Friday highlighting that Budget changes have abolished the withdrawal penalty for buying a house worth more than £450,000.
Lewis said these changes made an 'even stronger' case for opening a LISA, even for those who already own a home. The account can be used either to purchase a first home or to save tax-free for retirement with a 25 per cent Government bonus.
Frustration at 'ill-informed' comments
In a follow-up video, Lewis expressed frustration at some of the criticism his original post received. He said: "I've seen a number of comments from people who, frankly, why would you comment when you clearly don't know factually what you're talking about?"
He addressed two specific criticisms: that savers should put money in an S&P tracker instead, and that there is a penalty for buying a home over £450,000. Lewis explained that a LISA can be a cash or shares ISA, and an S&P 500 tracker can be held inside one, allowing savers to benefit from the bonus on top.
On the penalty point, he noted that the Budget removed the effective 6.25% fine for buying a property over £450,000, meaning savers get their money back plus interest, just as with a normal Cash ISA.
LISA rules and Budget changes
The LISA, available in cash and stocks and shares versions, allows contributions of up to £4,000 a year until age 50, with the first payment due before the saver's 40th birthday. The Government adds a 25 per cent bonus to all funds paid in. Withdrawals are normally only permitted for a first home purchase, at age 60, or if the saver is terminally ill with less than 12 months to live. A 25 per cent penalty applies for other withdrawals.
Chancellor John Healey removed the penalty for buying a home over £450,000 in his 2026 Budget. The LISA is scheduled to be replaced by a new First-Time Buyer ISA in April 2029, a change Lewis has campaigned for since 2023.
Advice for savers
Lewis reiterated that opening a LISA now starts the 12-month clock required before the bonus can be used for a first home purchase. He also noted that savers can contribute to both a LISA and the new First-Time Buyer ISA, but not in the same tax year.
For those who already own a home, Lewis said the LISA can be a decent retirement option, particularly for basic-rate, self-employed people. He advised putting a pound in now to keep the facility available for retirement saving in the future.
