LISA0036

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?

 

  1. The answer it should never have been offered as a pension vehicle, as the option to access it conflicts with pension planning, the idea of a pension until Rachel Reeves got involved has damaged the long term planning aspirations of many in the private sector who don’t have a gold plated final salary pension un-like many in the public sector or an MP’s defined package!!

 

  1. The purpose for buying a house is ideal for the benefits but few providers offer it because of the penalties or not using one for a house purchase

 

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

 

  1. The ordinary public have a difficulty in saving deposits, and if it was more openly discussed at an earlier age for people then there may be a bigger up take- but most building societies don’t even offer them- Nationwide BS- and with the cost of living now affecting everything accessing your saving from such a vehicle you incur a loss- a better overall market place for this product is needed- and the way the FCA run things it will only end up with more complex compliance issues!!

 

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

 

  1. Yes- if they obtain the benefit in increase house sales then they recover any tax relief by way of grabbing it by way of increase stamp duty- something that Rachel seems to understand very well- she is in the process of reducing the bands of stamp duty to lower levels.
  2. Do away with Lifetime ISA but do away with first time buyers stamp duty at all levels- the system has enough safeguards in place to ensure that people don’t bend the rules- it would encourage more house buying- the system would have checks in place like the car tax system of checking clients details on house purchases!

              

4. Is the Lifetime ISA a suitable pension savings product?  - NO

 

5. Should the Lifetime ISA be abolished? -NO

 

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

YES                           

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

NO- Self-employed people already ignore pension advice as they cannot understand the long term benefits and very few sit down with their accountants(accountant only talk about them for tax planning) or financial adviser to understand the need of one- if they have had parents who believed in saving for a rainy day they already understand the need for long term planning- until Rachel destroyed the benefits due to tax charges on inherited pensions- even though pension income is taxable- if a pension was inherited on death before 75 it  was free of inherited tax charges- after 75 taxable- it should have been the other way round taxable before 75 –tax free after 75- or later-85- annuities run on a 20 year scheme whereby the old scheme had reckoned that the funds would be depleted by then or the person would have died- nowadays new annuities schemes can give return of unused funds –don’t tell Rachel that,she will tax that too!!

 

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

Why – previous governments have ignored increasing ISA allowances and have frozen the tax allowance bands without increasing them by inflation either- another indirect tax on peoples wages

 

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

Yes why not make it £20,000 as a help to buy mortgage scheme and in line with the existing headroom on ISA’s – people are possibly taking money from a cash Isa and transferring it into them at the start of the financial year- as aa gift from the bank of father and mothers bank! Thus there is a lot of cash sitting in them but Isa transfers cannot take place to other individuals in different age groups- Isa transfers are only possibly for individuals and why would anyone over the age of 40 want one- allow parents to transfer monies into them for the benefit of their children without them having to take the cash out of one and then gift it to the child thus losing the tax benefit for 28 days possibly- but the gift would be subject to another potential inheritance tax grab- one of inherited allowable gifts to be made in a year but increased it from £3000.00 per year to £4000.00 and possibly more than one child!

 

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

Blend it into the same rules that apply to pension planning- accessible in full at the age 55 rising to 57 and potentially increasing again in 2030 or 2040- but with the restriction of £20,000 a year allowance staying in place- allowing the funds to be transfer to spouses or partners tax free on death as is currently in place for Isa’s, and without any inheritance tax grabs.

 

January 2025