LISA0003
Written evidence submitted by Anonymous
One very strange and inexplicable, and almost unknown by virtually everyone, rule attached to the lifetime IAS, penalises the poorest people most.
My guess is it was introduced to deter the super-rich but in reality, it penalises the super poor
I shall give you the simplest clear obvious example that applied to my son.
When using the lifetime ISA to purchase home there must be a mortgage used as well.
The man in the street might think well if you don’t need a mortgage, you must be rich and you can buy it anyway. No, not the case.
My son lives in the centre of Perth in Scotland where there is some very cheap accommodation.
He works very hard long hours managing in a pub and is paid a very low salary.
He had been renting a small cheap flat on top of a restaurant near his work.
The owner of the flat was happy to sell him the flat. It was not a beautiful flat, city centre and on top of a restaurant. He already lived there, and he liked the location a lot.
The price agreed was £72,000
Through family support and a small legacy from a grandparent, my son had built up Approximately £70,000 in his lifetime ISA. I was happy to help him with the small balance to help him buy the flat.
He then discovered that whilst he had all the funds he needed to buy the flat, there had to be a mortgage put in place to be able to use the lifetime ISA even though he didn’t need it
We spent months looking for anyone to give him a mortgage. For even £1.
He was buying a cheap flat on top of a restaurant. Every single mortgage provider said that property is not mortgageable. We went to multiple mortgage brokers and tried multiple avenues.
I went to banks and said why don’t you give us a £1 mortgage and I will pay you a fee of £500 for the £1 mortgage and I’ll pay it off as soon as you wish. That was also refused.
We discovered it was impossible to get a mortgage on the flat where he had already negotiated an affordable price with the owner.
He was forced due to an inexplicable rule that you have in place, to access his lifetime ISA and take the 25% penalty.
He happened to be lucky with parents that had already supported his brother and wished to make him equal, and we were blessed to be able to make up the difference and effectively pay the fine that the government took from him.
That is intrinsically unfair, in our view silly, and we can’t see any benefit from it.
Others will not have parents able or willing to pay this fine. Your rule penalises the poorest.
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December 2024