Choosing Between a First-Time Buyer ISA and a Lifetime ISA
Experts advise savers to keep using the existing Lifetime ISA rather than waiting for the government’s planned First-Time Buyer ISA, which may offer fewer financial advantages.
The government intends to phase out the Lifetime ISA within two years, introducing a First-Time Buyer ISA that removes age caps and withdrawal fees but delays the 25% bonus until the home purchase, forfeiting any interest or investment gains on that bonus. The Lifetime ISA currently allows contributions of up to £4,000 per year for individuals aged 18 to 40, with a government top-up of 25% paid monthly, potentially delivering up to £32,000 in free cash for long-term savers.
Experts such as Rachel Vahey of AJ Bell and Brian Byrnes of Moneybox caution that waiting for the new scheme could cost savers thousands in lost growth. The Treasury says existing Lifetime ISAs can continue to be opened indefinitely, and the new product is not expected before 2028. Details on the new account’s contribution ceiling and property price limit remain unclear, and transfers between existing ISAs and the new scheme are restricted to prevent double bonuses.
Why it matters
Choosing the right ISA affects how much government bonus and growth savers can earn toward buying a home.
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