LISA0024

Written evidence submitted Anonymous

1. Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?

No, it is not. I only use the Lifetime ISA for house purchase purposes, and each year I question whether it was the right choice. The dual-purpose design leads to doubts about its suitability, especially when it’s challenging to achieve either purpose effectively due to market conditions.

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 am still in the process of saving for a house and have no intention of using it for pension savings. This is because it feels increasingly difficult to purchase a property, and pensions feel safer and more accessible through other schemes.

3. Given its policy purposes, is the Lifetime ISA value for money for the Government?

The Lifetime ISA is a positive policy and should be encouraged and supported. However, its benefits are being eroded by inflation, particularly in the housing market, where the £450,000 price cap significantly limits its effectiveness.

4. Is the Lifetime ISA a suitable pension savings product?

I do not have a view on this as I am not currently using it for pension purposes.

5. Should the Lifetime ISA be abolished?

Certainly not. If anything, the scheme should be updated to better reflect its intended purposes and current economic conditions.

6. Should the Lifetime ISA be reformed to remove the withdrawal penalty?

Yes. If someone has been saving through the scheme and is unable to use it effectively, they should not face a penalty that results in losing more than they gained from government contributions.

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

No. Everyone I know without a home relies on the Lifetime ISA to help buy their first property, regardless of whether they have access to a workplace pension.

8. Should the Lifetime ISA house price cap be raised in line with inflation, or removed?

Yes. The house price cap should at least rise in line with housing inflation to remain effective. The £450,000 cap becomes less relevant each year, particularly in high-cost areas where housing inflation outpaces general inflation. While raising the cap may put upward pressure on house prices, other measures, such as regional development and levelling up, should address housing affordability more effectively.

9. Should the annual Lifetime ISA limit be raised from £4,000?

Yes, the annual limit should be increased, ideally in line with inflation, while maintaining the 25% bonus. To simplify implementation, the limit could increase in fixed increments—such as £500—when inflation thresholds are met. For example:

• If inflation suggests the limit should increase to £4,160, raise it to £4,500 instead.
• Keep the limit at £4,500 until inflation necessitates a further rise, such as £5,000.
• This approach balances clarity for consumers and aligns the limit with real economic conditions.

10. Should the Lifetime ISA be reformed in any other way?

• The Lifetime ISA is a valuable policy, but its effectiveness is being undermined by economic changes. The key reforms should include:
• Removing the withdrawal penalty.
• Increasing the house price cap to align with housing inflation.
• Raising the annual contribution limit in structured increments tied to inflation.

These changes would ensure the Lifetime ISA remains a relevant and accessible product for its intended purposes.

January 2025