Looking to open a Lifetime ISA

Short-n-Sweet

Just had a reel pop up on Instagram of Martin Lewis saying I should open a lifetime ISA and I am 40 in a couple of months so it's now or never. However I am finding it so confusing!

I have also seen people saying they signed up and have been charged on their own money, but I can't understand why.

Basically I am a 39 year old woman who is self employed. I'm thinking of opening one with the intention of it helping at retirement. So was wondering what would work best for me? I looked on moneybox but saw a few options.

If I did then decide to use it towards a home, would that be OK or is it a separate thing?

I am a chronic over thinking but since time is running out I would like to do it before it's too late. I have watched Martins videos and also read the posts hes done but just wanted someone elses opinion to make sure I do it right. Thank you!

p.s Just wanted to add, I would like one with no minimum payment or amount as I will be adding to it as and when I can.

jimjames

My son just opened one with Moneybox, process seemed easy enough and no charges. LISA is available to use for home purchase or retirement

El_Torro

If you are currently a 20% tax payer then putting retirement money in a LISA is better than a pension. If you pay 40% or more tax then a pension is more worthwhile.

Retirement money in a LISA can only be accessed penalty free at 60 years of age, compared to 57 for a pension. Of course the age you can access your pension might creep up over the coming decades.

I think there was some talk of making LISAs more specific to first time buyers and not people saving for retirement. I didn't look at that news too closely on this since I don't have a LISA and am too old to open one now. Worth considering what changes are on the horizon though.

I think you might as well open one now, since you can pay into it for years to come. If you don't open one before you're 40 you've missed your window. That doesn't mean you have to spend the next 10 years paying £4k into your LISA every year.

eskbanker

I think there was some talk of making LISAs more specific to first time buyers and not people saving for retirement. I didn't look at that news too closely on this since I don't have a LISA and am too old to open one now. Worth considering what changes are on the horizon though.

It was announced in the last budget that there'd be a new product for first time buyers, that will replace LISAs for that purpose - no further details but a consultation document on this should be issued soon.

Farway

https://forums.moneysavingexpert.com/discussion/comment/81882839#Comment_81882839

This was discussed today on R4 Moneybox, you should find it on BBC sounds etc.

One thing I did remember was the house buying price limit is now too low for many in the London and area, may also apply to other expensive city areas

dcs34

I have also seen people saying they signed up and have been charged on their own money, but I can't understand why.

There are two options I can think off - if it was a Stocks & Shares LISA and the provider charged a fee (from a quick search I can't see any that currently do).

The other reason might be the unauthorised withdrawal rule. If you try to withdraw money from a LISA for a purpose other than a first home purchase (or don't comply with the relevant qualifying requirements e.g. property value), or for retirement, you will be hit with a 25% charge on any withdrawals. This effectively claws back the 25% Government bonus plus 6.25% of your original deposits as a penalty*

*For clarity, if you deposit £80 then the Government bonus is 25% x £80 = £20, brining the balance to £80 + £20 = £100 total.

If you then withdraw that £100 for an unauthorised purpose the charge is 25% x £100 = £25, meaning you've lost £5 from your original deposit, plus the Government bonus.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81884631#Comment_81884631

Just to clarify, I meant that there were no further details in terms of authoritative announcements from the government, but yes, there's been plenty of speculative discussion elsewhere.

To be fair, the government did actually clarify that the new product will be closer to the HTB ISA scheme, in terms of bonus payment at time of use rather than during accumulation, thereby eliminating the LISA early withdrawal penalty for non-qualifying access:

The government will consult on introducing a new, first time buyer only product that will provide the bonus when a person uses it to buy a house, removing the need for a withdrawal charge and giving savers flexibility in case their circumstances change.

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.

https://www.gov.uk/government/publications/tax-free-savings-newsletter-19/tax-free-savings-newsletter-19-november-2025

Nurse2047

you are better off having a s&s Lisa than a cash Lisa. Inflation will erode any interest you get and compound interest in the Lisa will beat any interest in a cash Lisa.
I have a DoDl Lisa via AJ Bell- invest in a global index fund or ETF fund monthly and forget once direct debit set up.

Nurse2047

watch Damien talks money and the humble penny on YouTube also for info

Albermarle

Lifetime ISA (LISA): how they work & best buys