Martin Lewis ISA update as savers face major rule change

The MoneySavingExpert founder said the basic rule of investing is that you should only invest money you do not need in the short term. With a Junior ISA, the money is generally locked away until the child turns 18, meaning a newborn grandchild could have an investment pot running for almost two decades.

On a This Morning phone in, Lewis said: “I would suggest most people considering a Junior Isa should be looking at investing, not saving.” He pointed to the potential benefits of putting money into a broadly diversified investment, such as a global tracker fund, over such a long period.

He said: “So, if you've got a new grandchild, you're locking it away for 18 years. So that's you want in investing and don't need it. Well, they can't access it, so they don't need it.”

Lewis also argued that people can be “too risk averse” when considering long-term investing, although investments can rise and fall in value and returns are not guaranteed.

He added: “If you can lock it away and you don't need it, and you've got generally you've got your own money at savings, so you've got some cash emergency fund, then you should be looking at investing.”

ISA changes looming

Millions of savers could need to rethink where they keep their money as major ISA changes loom, with one expert warning people to make sure they are using the right account for their financial goals.

An Individual Savings Account (ISA) allows people to save or invest without paying tax on the money and returns held within the account.

There are four main types of ISA: Cash ISAs, Stocks & Shares ISAs, Lifetime ISAs and Junior ISAs.

You can have more than one type of ISA at the same time, but the overall amount you can deposit across your ISAs is currently £20,000 per tax year.

Brian Byrnes, Director of Personal Finance at Moneybox, said the right ISA depends on when you expect to need the money, how much risk you are prepared to take and your financial goals.

Cash ISA

For people building an emergency fund or saving for something they will need in the relatively near future, a Cash ISA can offer a straightforward way to keep money sheltered from tax.

Easy-access accounts offer greater flexibility because you can withdraw your money when needed, while fixed-rate accounts lock savings away for an agreed period in return for a guaranteed rate.

But savers also need to be aware of a major change coming in April 2027.

The annual amount that under-65s can deposit into a Cash ISA will fall from £20,000 to £12,000.

People aged 65 and over will retain the full £20,000 Cash ISA allowance.

Importantly, the overall ISA allowance will remain at £20,000 and existing savings will not suddenly become taxable.

Stocks & Shares ISA

If you already have enough cash set aside for emergencies and are saving towards a goal at least five years away, a Stocks & Shares ISA could be worth considering.

Unlike a Cash ISA, your money is invested, meaning its value can rise and fall.

Byrnes said investing returns have historically outperformed cash over longer periods, although investments can fall in value and there are no guarantees.

Another change is also planned from April 2027.

Cash held inside a Stocks & Shares ISA will face a 22% charge on returns, according to Moneybox.

Byrnes said this should not discourage people from investing, arguing that the changes are designed partly to encourage savers to move some money from cash into investments for longer-term goals.

He warned that keeping too much money in cash over a long period could leave savers vulnerable to inflation eating away at their spending power.

Lifetime ISA

For people saving for their first home or retirement, a Lifetime ISA (LISA) comes with a potentially valuable government bonus.

People aged 18 to 39 can open a LISA and save up to £4,000 a year, with the Government adding a 25% bonus.

That means savers can receive up to £1,000 in bonus money every year.

A Cash LISA could suit someone planning to buy their first home within around three to five years, while a Stocks & Shares LISA may be more suitable for longer-term goals such as retirement.

There is also a proposed new First-Time Buyer ISA in the pipeline, which could eventually be offered to new customers instead of the LISA.

However, key details, including the potential government bonus, have not yet been confirmed.

Byrnes stressed that the LISA is not disappearing immediately.

People can continue opening LISAs until the new product becomes available, which Moneybox says is likely to be in 2028.

Existing LISA customers will then be able to continue using their accounts as normal.

Why many opening a junior ISA should consider investing not saving.

On a @thismorning phone in where a grandma asked Martin 'wheres the best place to save for my new grandchild for when they're all older'. After explaining the savings options Martin suggests perhaps investing is… pic.twitter.com/d8oCUHs4YJ

— Martin Lewis (@MartinSLewis) September 7, 2026

Junior ISA

Parents and guardians can also use a Junior ISA to build up savings or investments for a child.

Up to £9,000 can be saved or invested tax-free each year.

Junior ISAs are available as either Cash ISAs or Stocks & Shares ISAs, allowing parents to choose between keeping the money in cash or investing it for the longer term.

The money can provide a financial nest egg for a child while also helping introduce them to saving and investing.

Which ISA is right for you?

There is no single ISA that will suit everyone.

If you need easy access to your savings or are building an emergency fund, a Cash ISA could be more appropriate.

For longer-term goals, a Stocks & Shares ISA may offer greater growth potential, although you need to be comfortable with investment risk.

A Lifetime ISA can be particularly attractive for eligible first-time buyers and retirement savers because of the 25% government bonus.

And for parents wanting to start building a financial cushion for their children, a Junior ISA offers a tax-free way to save or invest.

Byrnes said: “With any of these ISAs, consistency is key: saving and investing regularly throughout the tax year builds long-term momentum to ensure your money is set up for success.”

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What's an ISA 'wrapper'?

An ISA wrapper is the tax-efficient “container” that holds your savings or investments, rather than being a separate type of investment itself.

The ISA wrapper stays intact because the account remains registered as an ISA with the provider. The tax-free status applies to money held within that ISA wrapper.

In practical terms, you don't have to keep the same investment or savings product forever.

You can sell investments, switch between eligible investments, or move money between ISA providers using the proper ISA transfer process without losing the tax benefits. The key is to avoid withdrawing the money yourself and then paying it back into another ISA, as that can use up your annual ISA allowance.