LISA0008

Written evidence submitted by Anonymous

When the Lifetime ISA was first introduced, I eagerly began saving into it to achieve my goal of buying a house someday. Living in London for many years, I have seen the prices of reasonable housing rise far beyond the £450,000 limit of the LISA. Watching this happen but seeing no inflationary change to the limit, nor an adjustment to the withdrawal fee has led me to stop contributing to my LISA. I have approximately £40,000 in a stocks and shares LISA (including the government bonus), however I am very concerned that when it comes to buying a house some day soon, that I will have to take the money out to put towards my deposit and lose all the benefits of the product that I believed in from the start.

I fully appreciate that this is not a problem outside of London, where a large majority of house prices are under £450,000 limit, I believe the best solution is to raise the limit by a reasonable amount, considering inflation and the housing market, especially within London.

With regards to the questions proposed by the committee, I am grateful to be able to give my opinion on these:

1. Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving? No, I do not believe it is, it does seem like a product with a good incentive for pensions but no longer a good product for housing

2. How well do consumers transition between using the Lifetime ISA as a product for house purchase, to then a product for pension saving? I believe that consumers will open this product with the intention of using it for one or the other, rarely transitioning from one to the other unless concerned about withdrawal fees.

3. Given its policy purposes, is the Lifetime ISA value for money for the Government? I believe it is good long-term value for the government to encourage consumers to save for meaningful causes and increasing financial literacy, which will reduce future dependencies on government resources.

4. Is the Lifetime ISA a suitable pension savings product? It is a good option

5. Should the Lifetime ISA be abolished? No but it should be reworked

6. Should the Lifetime ISA be reformed to remove the withdrawal penalty? I believe the penalty should still apply if withdrawing for anything other than a house or pension, however if the money is still being used for a house over the limit, the penalty should not exist. So, for example: If the limit were raised to £600,000 and somebody wanted to buy a £700,000 house using their £50,000 LISA (assuming no growth). Their government bonus of £10,000 should be removed but they should be able to use the £40,000 towards the £700,000 house. This would of course have to only be considered fee free when in the process of buying a house.

7. Should the Lifetime ISA be restricted to those with no access to a workplace pension? No

8. Should the Lifetime ISA house price cap be raised in line with inflation, or removed? Ideally removed, there is already the restriction of first-time buyer to prevent greed and misuse of the product. The price cap is not aligned with the housing market anymore and unless regular assessment of this cap is considered, it should just be removed.

9. Should the annual Lifetime ISA limit be raised from £4,000? No, the 25% contribution from the government is generous but if the limit was increased then I think it would require too much funding from taxes. If the limit were to be raised, then perhaps only by inflationary amounts.

10. Should the Lifetime ISA be reformed in any other way? I feel that my suggestion in response number six around the fee remaining for normal withdrawals but being removed for house purchases above the cap could be a clean way to reform the Lifetime ISA.

Thank you very much for taking the time to read my thoughts, I am very excited to one day buy a house and I hope that the Lifetime ISA can be restored to a product that will help first time buyers in a way that is more representative of the times we are currently in.

December 2024