LISA0011
Written evidence submitted by Anonymous
The matter of lifetime ISAs is one very close to my heart. I initially transferred my Halifax help to buy ISA product into a HL stocks and shares LISA product in December 2017. The amount of money I had saved inside my help to buy isa at this point was £4,329.83. In January, I topped up the ISA with another £2200, bringing the total contributions for the tax year to £4000, the maximum allowable amount for the LISA. Owning my own home/flat was a very important goal for me and at the time, opening the LISA seemed like the best choice to help facilitate this goal. I truly believe that so far, this is the biggest mistake of my entire life.
As you will be aware, the maximum allowable house purchase with the ability to use the lifetime ISA is £450,000. This is £150,000 less than the help to buy scheme in London, a scheme set up to help first time buyers like myself purchase their first home by providing up to 40% equity on a home. I live and work in London, and in all of the places and boroughs that I wanted to live in and affordably commute to my job, I could not find a single 2 bed flat that was anywhere near £450k, let alone below it. Due to this, I was unable to use my LISA to help purchase my 2 bed flat, and this was extremely frustrating because the stocks and shares I had picked had grown to a sizable amount. I felt that I was being punished for my hard work in saving the initial contributions and growth from good stock selections because if I had drawn down the LISA in order to contribute to my flat, I would have lost 25% of the entire value of the LISA, not just the government contribution.
The fact that the LISA limit did not match the help to buy scheme limit in London was a painful oversight, and I’m shocked it was ever considered as a viable option. The help to buy scheme itself exacerbated these issues by greatly inflating house prices. To date, I have received £1632.46 of government contribution and the overall value of my LISA is (at the time of writing) is now £48,956.87 (due to growth in etfs, stocks and shares). If I were to draw all of this down, I would lose 25% of this value, paying a ‘fine’ of approx £12,240. As you can imagine, this is frustrating. What I find very perplexing is that there will be people in a similar boat to me, who NEVER received a government contribution (because they transferred their initial help to buy ISA into a new LISA and never topped up),who may have to pay an even larger fine to withdraw early due to their better stock picks/higher transfer amount.
Right now, the contents of my LISA is sitting in a tax free stocks and shares account, not helping me, not helping the British economy, and accruing compounding returns by the day. At the age of 60, the earliest age you can withdraw from a LISA without paying the fine, and assuming a market growth rate of ~8% per year, the amount of money available to me could be sitting at a projected £422,728.2. Granted I am in an interesting situation due to picking good stocks and shares, but these numbers truly boggle the mind. Whilst I 100% agree that the LISA is a specialist product that requires special rules to prevent abuse, until the day of my 60th birthday (or unfortunate terminal prognosis), the funds in this account will sit inside my LISA gathering dust and growing. I don’t want this to happen, so here are some suggestions to help deal with this problem.
Thank you for reading my contributions. I’d be more than happy to discuss in more detail in the future should my input be desirable.
January 2025