LISA0031

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? 

      No. It is now outdated. Maximum purchase price is now too low for London purchases and should have already increased to at least £600,000 to give first time buyers a reasonable chance to benefit from their LISAs. When LISAs were introduced the limit was acceptable and many young people would have invested confident in the knowledge that they could benefit. It is therefore wrong that they are now restricted and facing penalties through no fault of their own. We gave all of our four children money to invest in a LISA to help towards a deposit. Three based in the North West have all benefitted and successfully used their LISA. Our youngest, working in London is having to pay ridiculous rent and needs every penny possible to purchase a property but will be harshly penalised for using the money in their LISA because properties are not available within the current limit. This is unfair and against the spirit of the LISA. This in combination with the changes to stamp duty makes purchase so much more difficult and will result in stagnation in the London housing market. This will actually result in a reduction in stamp duty received by the Treasury. If first time buyers could use their LISA to buy a property for say £600,000 this would provide a boost to the housing market, allow sellers to increase their own purchase of a next property and result in more stamp duty being collected. Win win.

I never understood the reason for wrapping a house purchase product and pension product together. They have very different savings goals and time periods and should never have been linked in the first place.

2. How well do consumers transition between using the Lifetime ISA as a product for house purchase, to then a product for pension saving?   

      In my view they don’t. The majority of LISAs are used for house purchase with no intention of long term pension saving. It is also not possible to switch from one to the other. If you are buying in London you need every penny available so can’t decide to leave the money in a LISA for retirement, you have to suffer the penalty when that money is desperately needed for house purchase.

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

      It is not meeting it’s policy purpose of making housing more affordable for first time buyers in London. It is raising extra finance through penalties imposed but less people are investing as they no longer see the benefit. LISAs are failing in their intention.

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

      No. Does not meet the criteria for long term tax efficient saving.

5. Should the Lifetime ISA be abolished? 

      No but it needs reforming and making attractive again for all first time buyers.

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

      Yes so buyers are not penalised for an uncontrolled housing market.

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

      No. Not relevant.

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

      Preferably removed but increased by inflation (backdated) as an absolute minimum.

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

      Yes. It should have already been index-linked. It is now not sufficient to make a meaningful impact on rising house prices.

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

      It should be split for house purchase and pension. It needs to have the purchase price limit removed and the annual allowance increased. It need to be modernised and more flexible for a changing housing market.

January 2025