UK pensions: Lifetime Isa changes raise concerns for self-employed

The government plans to replace the Lifetime Isa with a first-time-buyer-only Isa, a change that has generated uncertainty among self-employed savers; HM Revenue & Customs says current Lifetime Isas can still be opened and used under existing rules until the new product appears.

The government has announced changes to the Lifetime Isa that would refocus the product for first-time house buyers, prompting concern among people who use the account to save for retirement. The Lifetime Isa currently carries a £4,000 annual limit and a 25% government bonus that is usually paid within a month of a contribution. HM Revenue & Customs has clarified that people can still open and save into a Lifetime Isa under the current rules until the new account is introduced. The role of the Lifetime Isa as an alternative for some self-employed savers has been central to the debate. Key points: - HM Revenue & Customs said existing Lifetime Isas can still be opened and used under current rules until the new first-time-buyer-only Isa is launched, and account-holders may keep saving in line with existing rules. - Reports suggest the first-time-buyer-only Isa could launch in 2028, though full details have not been published. - There are an estimated 4.25 million self-employed workers in the UK, and the article reports that about 20% of them save into a pension. - The article cites industry figures showing a gap between employed and self-employed pension savings: average pension savings for employed workers were reported at £86,700 versus £26,500 for the self-employed, and only 36% of self-employed households were described as on track for an adequate retirement income compared with 46% of employed households. - The Lifetime Isa is described in the article as offering an immediate, visible 25% bonus on contributions, while personal pensions receive tax relief that can be less immediately visible; early withdrawal from a Lifetime Isa incurs a 25% charge unless used to buy a first home. - The article quotes voices from providers and industry groups, including AJ Bell, PensionBee and Aviva, who say details are still missing and that changes risk reducing options for people who used the Lifetime Isa for retirement saving. Summary: The announced shift to a first-time-buyer-focused Isa has raised concern because many self-employed people have used the Lifetime Isa as a simpler route to long-term saving. The government’s clarification preserves current Lifetime Isa access for now, but many details about how the new product will operate alongside existing Isas remain unclear. The UK Pensions Commission is due to publish an interim report in the coming weeks, which may include proposals relating to self-employed savers and pension provision.