Prospective first-time homeowners still have a reason to open a Lifetime Isa (Lisa), despite the recent announcement of a new government-backed account. The First Time Buyer Isa is slated to launch in April 2029, but until then, the Lisa remains the primary option for those seeking a government bonus to help with a property purchase.
The new First Time Buyer Isa will offer a 25% government bonus on contributions, similar to the Lisa, with a maximum annual contribution of £4,000. The maximum property purchase price will also be capped at £450,000. A key difference is that the First Time Buyer Isa will only grant the bonus upon withdrawal for a house purchase, meaning withdrawals for other reasons would forfeit the bonus but incur no penalty. The Lisa, conversely, imposes a 25% penalty on withdrawals not used for a qualifying home purchase or retirement after age 60, though this penalty has recently been reduced to 20% for those buying a home exceeding the £450,000 limit.
While the new Isa is dedicated solely to saving for a first home, the Lifetime Isa also serves as a retirement savings vehicle. Individuals aged under 40 can open a Lisa and contribute until age 50, with access possible at 60. This dual purpose makes the Lisa valuable for those, such as the self-employed, who may not benefit from robust pension auto-enrolment or employer contributions.
Individuals over 40 who wish to save with a government bonus for a first home will need to wait for the First Time Buyer Isa, as the Lifetime Isa is only available to those aged 39 and under. Furthermore, Lisa contributions cease at age 50.
Savers can contribute to both a Lifetime Isa and the upcoming First Time Buyer Isa, but they can only pay into one Isa product per tax year. Funds from both accounts can be used towards a deposit. Those with existing Help to Buy Isas, which closed to new applicants in 2019, can continue contributing until November 30, 2029, and can transfer these funds to the First Time Buyer Isa, provided deadlines are met. The Help to Buy Isa scheme itself will close entirely on December 1, 2030.
For those choosing to open a Lifetime Isa now, various providers offer cash and stocks and shares options. For instance, Moneybox offers a cash Lisa at 4.75% variable, including a 1.95% fixed bonus for 12 months. Plum's cash Lisa has a variable rate of 4.2%, with a 1.09% fixed boost for 12 months, resulting in a stronger underlying rate of 3.11%. AJ Bell Dodl provides a stocks and shares Lisa suitable for novice investors, with a 3.8% variable rate on uninvested cash. Other providers like AJ Bell and Hargreaves Lansdown also offer stocks and shares Lifetime Isas.