I’ve solely obtained a number of months to open a Lifetime Isa – ought to I do it or will modifications make them redundant?

I am wondering whether I should open a Lifetime Isa. I am 39 and will be turning 40 in April, so I only have a few months in which I can still open one. 

However, I’m aware a new product will replace the Lisa from April 2027.

If I open a Lifetime Isa, how long will I be able to keep saving in it for a house deposit, or for retirement?

I don’t yet own a home, and I already save into a workplace pension.  

Helen Kirrane of This is Money replies: The Lifetime Isa is set for a major shakeup. 

Currently, a Lifetime Isa can be used for building a house deposit – but also as a retirement fund that you can tap into at 60. You can open one if you are over the age of 18 but under 40.

The Government announced it is looking to replace it with a new version, starting in April 2028. This new account would scrap the Lifetime Isa option to save for retirement and could only be used to save for a first home. 

However, the old Lifetime Isa will continue to exist for those who have already opened one. So is it worth opening one, while you still can? 

For expert advice on whether or not you should open a Lifetime Isa now and whether the changes will render saving in one redundant, we spoke to Rachael Griffin, tax and personal finance expert at wealth manager Quilter and Brian Byrnes, director of personal finance personal finance app at Moneybox. 

Should you open a Lifetime Isa now? 

Rachael Griffin replies: Before rushing to open a Lifetime Isa, it is worth taking a breath. While the 25 per cent government bonus sounds attractive, this has always been a product with caveats, and in many cases, confusion.

You should only open one now if it clearly aligns with your circumstances.

If you are a first-time buyer, confident that you will purchase within the £450,000 price cap and able to leave the money untouched for at least a year, the current rules still offer a meaningful boost. 

If you are thinking primarily about retirement, the fact that that element is being removed underlines that there are usually better tools available.

The Lifetime Isa works best when used with a clear, defined purpose with full knowledge of its limitations. Opening one purely out of fear of reform is rarely the right reason.

If you are planning to use it for retirement 

Rachael Griffin replies: The Lifetime Isa was designed to serve two purposes: helping people buy their first home and helping them save for retirement. In practice, that dual role has blurred its purpose. 

For retirement saving in particular, it has rarely been the strongest option. Pensions generally offer more powerful incentives, especially for employees who benefit from employer contributions and higher rate tax relief. 

For most people focused on long-term retirement planning, a pension remains the more effective foundation.

The direction of policy now reflects that reality. The Government is set to soon formally open a consultation and has confirmed that the retirement element will be removed in a future overhaul of the product. 

The replacement is expected to focus squarely on supporting first-time buyers rather than doubling up as a retirement vehicle.

What remains unclear is the detail of the new, first-time buyer-focused product. We do not yet know whether the £450,000 property price cap will change or how the government bonus might be structured in future. Until legislation is published, some uncertainty remains.

Brian Byrnes replies: If you’re looking at ways to bulk up your retirement savings, you should also look at utilising your workplace pension if you have one. 

Doing so means you can benefit from employer contributions and automatic tax relief – something that’s especially crucial for higher rate taxpayers. 

If you are planning to use it to buy a first home 

Rachael Griffin replies: For first-time buyers under the current rules, the Lifetime Isa can still be valuable. The 25 per cent bonus is generous and can significantly boost a deposit, provided you are confident in your plans. 

The account must be open for at least 12 months before it can be used for a property purchase, and the property must cost no more than £450,000. 

That price cap has not moved since launch, despite rising house prices, which makes it increasingly restrictive in higher value areas. If you exceed it, you cannot use the funds without triggering the withdrawal penalty.

That penalty is another reason to proceed carefully. Withdraw money for any reason other than buying your first home or after age 60 and the 25 per cent charge effectively claws back the government bonus, and slightly more. You could end up with less than you put in. 

This makes it far less flexible than a standard Isa and unsuitable for anyone who may need access to their savings unexpectedly.

Will it be made redundant with the changes? 

Brian Byrnes says: I can reassure you that the Lifetime Isa is not being scrapped or made redundant, certainly not in the short or medium term. 

While the Government has announced a consultation into a product solely for first-time buyers that will eventually be offered in place of the Lifetime Isa to new customers, it’s unlikely we’ll see any such product become available before April 2027 at the earliest – more likely 2028.

Those who already have a Lifetime Isa need not worry about future contributions either. 

The Government has confirmed that existing Lifetime Isa holders will be eligible to continue making deposits and receiving up to £1,000 in free money as usual, even after any new product has launched. 

Rachael Griffin replies: HM Revenue & Customs confirmed it will remain possible to open a Lifetime Isa until the new product becomes available, and for account holders to continue to save into their Lifetime Isa, in line with the existing rules, indefinitely.