{"id":400095,"date":"2026-01-31T05:52:28","date_gmt":"2026-01-31T05:52:28","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/400095\/"},"modified":"2026-01-31T05:52:28","modified_gmt":"2026-01-31T05:52:28","slug":"lifetime-isa-retirement-plan-could-be-dropped-by-government-in-favour-of-a-new-home-buying-isa","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/400095\/","title":{"rendered":"Lifetime Isa retirement plan could be dropped by government in favour of a new home-buying Isa"},"content":{"rendered":"

By HELEN KIRRANE, REPORTER, THIS IS MONEY<\/a> <\/a> <\/p>\n

Updated: 12:26 EST, 30 January 2026 <\/p>\n

Younger savers who have utilised the Lifetime Isa<\/a> in order to build an extra retirement pot for later life are set to bare the brunt of sweeping changes to the tax-free account.\u00a0<\/p>\n

The Government is looking to scrap the option to save for retirement in the Lifetime Isa and replace it with an Isa that can only be used to buy a first home.<\/p>\n

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.\u00a0\u00a0<\/p>\n

From April 2028, the Government will introduce an overhauled Lifetime Isa focused solely on helping first-time buyers<\/a>.\u00a0<\/p>\n

Crucially, the new account will no longer pay the Government’s 25 per cent bonus on a monthly basis – a a major perk of the account.<\/p>\n

The bonus will instead be paid as a lump sum at the point of purchase of a first home.\u00a0<\/p>\n

The proposed changes mean savers who have used the Lifetime Isa to build their retirement savings instead of a deposit for a property risk being left in the lurch.\u00a0<\/p>\n

\"Savers <\/p>\n

Savers who use a Lifetime Isa to save towards their retirement will be hit as a new Lifetime Isa product set to launch from\u00a0<\/p>\n

> Should you open a Lifetime Isa to save for your first home?\u00a0 \u00a0<\/a><\/p>\n

Maike Currie, of Pension Bee, says: ‘The Lisa has become an important retirement savings product for a growing cohort of savers.’<\/p>\n

The decision to scrap the retirement saving function of the Lifetime Isa will also disproportionalty effect those who are self-employed.\u00a0<\/p>\n

‘Many self-employed workers, who lack access to workplace pensions, have turned to Lifetime Isas to build long-term savings, making the most of the government bonus,’ Ms Currie explains.\u00a0<\/p>\n

‘Removing the retirement element without providing a clear plan for those who have used the Lifetime Isa in this way, risks it becoming a ‘zombie product’ and leaving these savers out in the cold,’ she adds.<\/p>\n

You can save up to \u00a34,000 a year, which the Government tops up by 25 per cent so savers could bag a \u00a31,000 bonus a year. It is available to open between the ages of 18 and 40.\u00a0<\/p>\n

It means for those who have utilised the full limit since 2017 could have roughly \u00a332,000 in the account, plus \u00a38,000 worth of government bonuses, alongside any investment growth.\u00a0<\/p>\n

You can opt to save in a cash Lifetime Isa or invest the \u00a34,000 allowance in a stocks and shares Lifetime Isa.<\/p>\n

Currently, money can be withdrawn penalty-free to buy a first home worth up to \u00a3450,000 or after age 60 for retirement, which will be in place until April 2028.<\/p>\n

The Government announced in the Autumn Budget<\/a>\u00a0it wanted to launch a consultation on the Lifetime Isa.<\/p>\n

The Chancellor also announced an overhaul to the Isa regime which saw the cash Isa<\/a> allowance being cut to \u00a312,000 a year for under 65s – from its current \u00a320,000 limit – from April 2027.\u00a0<\/p>\n

Savers will no longer be able to transfer money from a stocks and shares Isa<\/a> to a cash Isa and will face a charge of up to 22 per cent on any interest earned on cash sitting in a stocks and shares Isa from April 2027.<\/p>\n

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\n Lifetime Isa retirement plan could be dropped by government in favour of a new home-buying Isa<\/p>\n