Martin Lewis issues £1 tip to anyone tempted by a Lifetime Isa

The Government said the consultation will explore whether the Lifetime ISA should be replaced with a new savings product.

He said opening an account now could protect people’s eligibility if the scheme is closed to new applicants.

He said even a minimal deposit would secure access to the Lifetime ISA framework should changes be introduced.

The advice was shared during The Martin Lewis Money Show Live on ITV1 earlier this month.

Mr Lewis was responding to a viewer in his early 30s who already owned a property and questioned whether it was worth continuing with a Lifetime ISA.

Lifetime ISAs are available to people aged between 18 and 39.

They allow savers to put money into a tax-free account either towards buying a first home or for later life.

The Government adds a 25 per cent bonus to contributions, up to an annual limit.

|

PA

Funds can be used to purchase a first home or accessed later as a retirement pot.

Money withdrawn for retirement purposes becomes available once the saver reaches the age of 50.

Mr Lewis said the uncertainty created by the consultation meant younger savers should act now.

“I think what I’d say to you is we’re in a limbo stage.”

He believed it would be unlikely for the Government to remove the bonus from those who already hold a Lifetime ISA.

The most severe outcome would likely be restrictions on future contributions or new applicants.

The MoneySavingExpert said: “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”.

| GETTY/GBNEWS

He said opening an account would preserve access to the product if rules change.

Mr Lewis added that he expects existing account holders to be protected.

He said: “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”.

However, he advised caution when it comes to contributing larger sums, and that people may want to wait until the consultation concludes before committing significant savings.

“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”.

Lifetime ISAs have faced criticism since their introduction.

Concerns have been raised about withdrawal penalties for those who access funds for reasons outside the scheme rules.

Critics have also argued that the property price cap has failed to keep pace with rising house prices.

Despite this, the product has been widely used by first-time buyers and those without access to workplace pensions.

Carol Knight, chief executive of the Investing and Saving Alliance, said the Government should proceed carefully.

Ms Knight urged ministers not to rush into scrapping the Lifetime ISA.

She said: “This is a moment for sensible reform of the Lifetime ISA, not a rush to scrap it”.

The scheme has played an important role in helping people save.

The Lifetime ISAs have supported first-time buyers building deposits, and provided a straightforward retirement savings option, particularly for the self-employed, and said that any replacement must protect existing savers.

“As the Government consults on a new ISA for homebuyers, it must protect the strengths of the LISA and give clarity and fair treatment to existing savers – not dismantle a product that is already delivering for those trying to save for both a first home and later life.”

The Treasury has not yet confirmed when the consultation will conclude.

Ministers have said further details will be set out following the consultation process.

For now, Mr Lewis said younger savers should consider opening a Lifetime ISA to preserve their options.