Martin Lewis is urging people to act quickly with as little as £1. It comes after Chancellor Rachel Reeves announced a consultation about replacing the Lifetime ISA (LISA) in her budget last month.
Mr Lewis is now advising anyone under the age of 39 to open a Lifetime ISA immediately and deposit £1. The financial guru said this will protect people’s eligibility if the scheme, which allows anyone aged 18 to 39 to put money into a tax-free savings account to buy their first home, is closed to new applicants. The amount is topped up with a 25% bonus, with those who don’t use the money to buy a house able to switch it to a retirement savings account they can access when they reach 50 years old.
As reported by GB News, the Chancellor said the consultation will explore whether the LISA should be replaced. The scheme has been criticised for withdrawal penalties as the cap on house purchases hasn’t risen with price inflation.
Speaking on The Martin Lewis Money Show Live on ITV, a viewer aged in his early 30s, who already owned his own home, asked Mr Lewis whether it was worth continuing with a LISA. The expert’s response was clear as he urged young savers to act as soon as possible.
He said: “So the only reason you’d do it is for retirement savings because you can’t get the bonus twice.” He continued: It’s better than saving in a normal savings account because you get a 25% bonus on top.
“I think what I’d say to you is we’re in a limbo stage. I think it would be unthinkable for them to close the Lifetime ISA and not give you the bonus aged 50. I think the worst is they’d stop you putting any more money in.
“So, what I would say, funny I’ve just thought of this as I’m talking now, what I’d say to anybody of this age, even if you’ve bought a house and you haven’t got a Lifetime ISA, put £1 in one now, just in case they do close it down and later you wanted to use it for retirement. You’ve got that facility.
“But I’d probably, and the Chancellor would hate me saying it, I’d sort of be in limbo at the moment and wait and see what happens in that consultation before I put too much more money in, because we don’t know where we’re going.
“But my guess is they’ll keep it open for people like you who’ve opened one, but not allow anybody new to have the same situation that you’ve got.”
Despite criticism, LISA has been used widely by first-time buyers and those without access to workplace pensions. Carol Knight, chief executive of the Investing and Saving Alliance, has warned the Government to be careful.
She said: “This is a moment for sensible reform of the Lifetime ISA, not a rush to scrap it”.
