Martin Lewis ‘that’s important’ update for anyone trying to buy a home | Personal Finance | Finance

Martin Lewis has issued an urgent call for adults aged between 18 and 39 to deposit £1 into a particular type of account before time runs out. The money-saving expert was addressing Lifetime Individual Savings Accounts (LISAs).

These are set to be scrapped next April following the Government’s announcement of a replacement product called a First-Time Buyer ISA (FTB ISA). Nevertheless, the LISA remains accessible for now, with savers able to contribute up to £4,000 annually until the age of 50.

The Government then adds a 25 per cent bonus, though the funds can only be utilised for purchasing a first property or withdrawn once you reach 60 or become terminally ill. A 25 per cent penalty applies if you take out money or move the Lifetime ISA to a different ISA type before turning 60.

Despite facing various criticisms, Mr Lewis insisted it was still worthwhile for people to open them while they remain obtainable, purely to retain the choice of utilising it in future years. They can be established with as little as £1.

Mr 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. But, the government is consulting on replacing it with a new First-Time Buyer’s ISA. When they do, they’ll close the LISA down to new applicants.

“However, if you’ve already got one open, even with just a quid, you can continue to use it. And that’s important, because what they’re suggesting is, for first-time buyers, you’ll be able to get the bonus on a LISA and the new First-Time Buyer ISA. And for retirement savings, there won’t be any equivalent.”

Why is the LISA being scrapped?

Complaints surrounding the LISA centre on its complexity and the fact that combining a property-purchasing tool with a retirement savings vehicle within a single product was never going to serve both purposes effectively.

A further issue is that funds used towards buying a home are only accessible when both purchasers are first-time buyers and the property is valued below £450,000 — a threshold that has remained unchanged since 2017.

That may appear a considerable sum, yet with the average first-time buyer in London now spending £463,000, savers would face a 25 per cent penalty charge to access their funds. According to the BBC, in 2024/25, approximately 87,250 people across the UK made authorised withdrawals for a property purchase, while 129,200 made unauthorised withdrawals.

Furthermore, the 25 per cent charge drew considerable criticism as it effectively reduces savers’ own contributions rather than solely clawing back the extra 20 per cent provided by the Government.

The FTB ISA, which is set to supersede the LISA, has been long anticipated, but further details emerged earlier this week. It will be exclusively available to first-time buyers purchasing a property with a mortgage.

Savers would still receive a tax-free government bonus. However, it will be credited to the account at the point the holder is prepared to purchase their first home, rather than on a monthly basis as with the LISA. This means no withdrawal penalties would be incurred.

The bonus will be calculated on the amount contributed, minus any withdrawals, and will not account for any investment growth.

“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,” said Rachel Vahey, head of public policy at AJ Bell.

“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. For some first-time buyers, that could mean having less money available when they come to purchase a home.”

There will also be no upper age restriction on the account, and contributions made will still count towards the £20,000 annual ISA allowance. Account holders will not be permitted to move funds between a LISA and a FTB ISA, however they will be able to draw on money from both accounts when putting down a deposit on a property.

The FTB ISA will offer both a cash option and a stocks and shares option. Moving funds from a stocks and shares FTB ISA into a cash FTB ISA will not be permitted, whereas transfers in the opposite direction will be allowed.

Savers will also have the ability to move money from FTB ISAs into a standard stocks and shares ISA, though not into a standard cash ISA.

The Government additionally confirmed earlier this week that interest earned on cash held within a standard Stocks and Shares ISA will be subject to a 22 per cent tax rate from April 2027.