Letter from the Founder: Lifetime ISA Q&A

There is a product I have recommended to a lot of people over the years. I still think it was the right call at the time. But the government has confirmed it is being wound down in its current form, and the comments on my recent video tell me there is a lot of confusion about what this actually means for people in different situations. I want to address that properly here.

First, the question I am seeing most often: is this set in stone?

Yes. The government has confirmed the Lifetime ISA is being replaced by a new First-Time Buyer ISA in April 2028. This is not a proposal. It is confirmed policy, announced in the Autumn Budget 2025 and backed by HMRC guidance. The retirement element of any new account opened from 2028 will not exist. The 25% withdrawal penalty on the new product is also going, which removes one of the most controversial aspects of the original design.

If you already have a LISA

Your account is not closing. You can keep contributing up to £4,000 a year and receiving the government bonus after April 2028. What has not yet been fully clarified is what happens to the retirement element of existing accounts after that date. That detail is still being worked through by the government, and I will update you the moment we have more certainty. If you are using your LISA to bridge the gap between early retirement and the state pension, or as a long-term retirement pot, keep your ear to the ground on this one.

Should you open one now?

If you are planning to buy in the next couple of years, opening a LISA now makes sense. Even putting in a small amount, as little as £1, to establish the account and the 12-month rule clock ticking is a reasonable move. You do not have to wait until 2028 to decide whether it suits you. If you change your mind, you still have time to withdraw under the current penalty rules, though the 25% charge applies to withdrawals that are not for a first home or retirement, so factor that in.

The 2-in-1 argument

One of the things people valued most about the LISA was its flexibility. If you started paying in at 19 for a first home but later inherited a property, moved abroad, or decided to keep renting, you still had a retirement pot building in the background. That flexibility disappears for anyone opening a new account from 2028. For existing holders, particularly younger ones, that uncertainty about the retirement element is the thing most worth watching.

LISA versus SIPP: who wins?

This depends entirely on your tax rate.

For a basic rate taxpayer, the LISA is genuinely competitive. You put in £4,000, the government adds £1,000, and the whole pot, including growth, comes out tax-free at retirement. That tax-free exit is valuable, and for lower earners, it can make the LISA the better option on paper.
For anyone paying higher rate tax, the SIPP wins. Every £100 that goes into a SIPP costs a basic rate taxpayer £80. It costs a higher-rate taxpayer just £60. That upfront relief is significant. The money grows free of tax, you can access it from 57, and while withdrawals are taxed on the way out, most people are in a lower tax bracket at retirement than during their working life, so the maths still works in the SIPP’s favour.

There are two other practical advantages to a SIPP worth naming. First, you have a much broader range of investments available than within most LISA products. Second, as mentioned above, you can access your SIPP at the age of 57. For the LISA, you cannot access the money until after you turn 60. The other thing worth taking into account are the contribution limites. A SIPP will allow you to contribute 100% of your salary up to £60,000 in any tax year, whereas a LISA will only accept contributions of £4000 a year.

My honest view is this: if retirement is your primary goal and you are a higher rate taxpayer, a SIPP should not be sitting alongside your LISA. It should be your main vehicle. If you are a basic rate taxpayer using the LISA to bridge to the state pension or as a tax-free retirement top-up, it remains worth keeping, particularly for existing holders. But the retirement element of the new product simply will not exist for anyone starting fresh from 2028, and that changes the calculation for anyone planning ahead.

More detail to follow as the government confirms the specifics of existing accounts. I will update you as soon as we know more.

Antonia Founder, Investing Insiders

This is not financial advice. Capital at risk.

If you are unsure what is right for your situation, speak to a regulated financial adviser. Sources: HM Treasury confirmation via Citywire; HMRC Tax-free savings newsletter 20, January 2026; Autumn Budget 2025 (gov.uk).