LISA0063

Written evidence submitted by Anonymous

I am an individual, submitting this evidence on behalf of my daughters, who both currently have just over £10,000 saved in a LISA.  Neither have contributed more to their LISAs in the past two years because of the restrictions and penalty.

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

It’s relatively easy to understand and very easy to set up. 

The combined nature is a bit odd – for pension savers it’s better to use a pension.  But people need another option to access their funds if they never buy a house – because they can never afford it or move abroad – so the pension element gives that option. 

But if there was an alternative eg take out money without benefit of government contribution but without other financial penalty, that might be better than combining the house purchase and pension options in one product.

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

 No knowledge

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

 No knowledge.

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

 A pension is better and too much choice causes confusion.

5. Should the Lifetime ISA be abolished?

No 

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

 Definitely.  Or the penalty should be restricted to the government contribution + base rate interest on that contribution.  For those who can never ultimately afford to buy a house or need to access their money for another reason (eg training, education), they face a harsh penalty as they take out less than they put in.  This is likely to disproportionately affect young people on lower incomes.

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

 No, because the house purchase option is still beneficial to those with a workplace pension, and first-time buyers need all the help they can get.

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

Definitely.  One of my daughters is keen to buy a property but no longer contributes to her LISA because she lives in London, so is highly unlikely to find a flat to buy within the price cap of £450,000.  She’ll need to access her LISA savings when she can afford to buy, but at present, she stands to take out less money than she put in if she uses the LISA to buy a flat above the cap.

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

 No, or only by inflation.

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

Consider another option to withdraw funds if needed without financial penalty beyond losing the government contribution. 

January 2025