LISA0057

Written evidence submitted by Anonymous

I am responding to this call for evidence as a Lifetime ISA account holder and consumer, who is not close to retirement age. I do not have any relationship with the financial industry to declare.

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

As I have not yet withdrawn from my Lifetime ISA, I do not feel qualified to answer this question.

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

As I have not yet withdrawn from my Lifetime ISA, I do not feel qualified to answer this question.

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

I do not feel qualified to answer this question, beyond that the Government should encourage savings and the benefits provided by the Lifetime ISA – a monetary bonus – is personally a key reason why I chose to invest in a Lifetime ISA.

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

Compared to a SIPP or workplace pension, the limited cap on contributions makes a LISA a poor pension savings product for high earners in my opinion. The pension tax relief makes the LISA even less appealing, as does the higher age requirement. However, the freedom of withdrawals from taxation is why I personally chose this product.

5. Should the Lifetime ISA be abolished?

Only if a better alternative is provided and there is no penalty to LISA holders to move to this alternative.

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

Rather than removing it, as Martin Lewis of Money Saving Expert has rightly pointed out, there should be no penalty beyond the removal of the Government bonus. The extra 5% penalty is unfair and is nonsensical.

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

It is unclear what the benefit would be to either the Government or the consumers to restrict access. It would make the ISA market even more complicated than it already is, and provide no benefit to these savers who likely already have access Help To Save.

If the decision to restrict is made, it should also include SIPPs.

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

I am of the belief that the cap should not be removed: restricting the price of houses it can be used for provides protection for money laundering and extra tax benefits for HNW individuals. However, in my opinion the cap should be set not by inflation or the average house price. The average house price differs wildly by area.

I believe it would be fairer to set it to the 75th percentile of the House Price Index so that the ISA is useful for the vast majority of first-time buyers.

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

The ISA should be useful for at least half of a 5% house deposit within 3 years of saving at the maximum value. Therefore, I believe it should be possible to save £8,000 a year.

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

Any decided increases should be encoded in law to ensure savers aren’t penalised. A similar promise (“The Triple Lock”) is made to pensioners, which begs the question: why not provide similar assurance to the economically active too?

Finally, I highly encourage the committee to engage with Martin Lewis of Money Saving Expert in designing the most beneficial Lifetime ISA product for both the Government and the savers of our country.

January 2025