LISA0030

Written evidence submitted by Anonymous

1. Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?
Yes, it is fit for purpose; however, the contribution limits must be increased in line with inflation. Without this adjustment, people may lack sufficient motivation to save.

2. How well do consumers transition between using the Lifetime ISA as a product for house purchase to then as a product for pension saving?
In my opinion, consumers are likely to utilize the Lifetime ISA primarily during the initial stages of saving for a house and possibly later in life as they approach retirement. However, the 25% withdrawal penalty significantly hinders its practical usability, creating a barrier to its meaningful adoption.

3. Given its policy purposes, is the Lifetime ISA value for money for the Government?
It can be, provided the contribution limits are adjusted to reflect inflation. The Government should focus on reforming existing schemes like this rather than supporting initiatives like Help to Buy, which only serve to inflate house prices further.

4. Is the Lifetime ISA a suitable pension savings product?
No, it is not a suitable product for pension savings.

5. Should the Lifetime ISA be abolished?
No, it should not be abolished.

6. Should the Lifetime ISA be reformed to remove the withdrawal penalty?
Yes, removing the withdrawal penalty would likely lead to higher adoption rates. The penalty is a significant disincentive, and its design appears disconnected from practical realities. Losing one's own savings deters people from using the product effectively. Eliminating this penalty would be a step in the right direction to encourage greater participation.

7. Should the Lifetime ISA be restricted to those with no access to a workplace pension?
No, it should not be restricted in this manner.

8. Should the Lifetime ISA house price cap be raised in line with inflation, or removed?
The house price cap should be raised in line with inflation. With current limits fixed until 2028, many individuals face a stealth tax. Adjusting the cap for inflation would ease financial pressures and encourage a culture of saving.

9. Should the annual Lifetime ISA limit be raised from £4,000?
Yes, it should at least be adjusted to match inflation. Ideally, it should be increased further to encourage higher savings rates and promote financial discipline, rather than forcing people into borrowing and dealing with the associated stress of debt repayment.

10. Should the Lifetime ISA be reformed in any other way?
No, additional reforms are unnecessary.

January 2025