Expert ISA deadline alert for savers – ‘should you?’ | Personal Finance | Finance

Savers are being warned that the clock is ticking down on one of Britain’s most generous tax-free savings products.

Consumer champion Which? has issued the alert, highlighting that the popular savings vehicle – which offers a lucrative Government bonus – will no longer be available to new applicants from April 2028. The move, confirmed by HM Revenue & Customs, will see the Lifetime ISA (LISA) replaced with a new first-time buyer-only product, marking a major shift in how Britons can save for both property and retirement.

Why the urgency?

The Lisa, launched in 2017, allows savers aged 18 to 39 to put away up to £4,000 a year and receive a 25% Government bonus worth up to £1,000 annually.

But from April 2028:

• You won’t be able to open a new Lisa
• Existing accounts can continue under current rules
• A new, more limited product will take its place

That means anyone considering using a Lisa for retirement must act before the deadline.

Millions are already using it

The product has surged in popularity, with account numbers nearly doubling from 706,000 in 2020-21 to 1.34 million in 2023-24, according to official figures.

However, uncertainty remains over how many are using it specifically for retirement after some official data was withdrawn over accuracy concerns.

Is it worth it for retirement?

Experts at Which? say the answer isn’t straightforward. While the 25% bonus is attractive, workplace pensions often come out ahead – especially for employees benefiting from employer contributions.

For example:

• A worker earning £34,000 could see over £2,200 a year going into a pension thanks to employer top-ups and tax relief
• The same personal contribution into a Lisa would total around £1,388 including the bonus.
• That gap can make pensions the stronger option for many.

Who should consider it?

A Lifetime ISA may still make sense if:

• You’re self-employed and lack employer pension contributions
• You’ve maxed out pension allowances
• You want a tax-free pot alongside your pension

But there are risks:

• Withdraw funds early (for anything other than a first home) and you face a 25% penalty. This can leave you with less than you originally saved.
• Concerns for self-employed. There are growing warnings that scrapping the Lisa for retirement saving could hit freelancers hardest. Only one in five self-employed workers currently pays into a pension, and industry figures warn the changes could leave them with fewer options to build long-term savings.