LISA0115

Written evidence submitted by Mr Hector Leitch

Introduction:

My name is Hector Leitch. I am a 29 year-old professional working and living in South West London, and my primary reason for submitting evidence is that I have a Lifetime ISA which has become unsuitable for purchasing a long-term home in this area.

Points 1, 2, 4, and 7, my thoughts on the Lifetime ISA as a product for first home purchasing vs. retirement saving:

My personal view is that the Lifetime ISA is much better as a product for first home purchasing than retirement saving. For most people, being auto-enrolled into a workplace pension scheme is as good or better than the Lifetime ISA, as money can be added to the pension pot before income tax. However, for younger professionals who are building a deposit for their first home, the 25% bonus is great for accelerating this process. Many in my generation, myself included, are frustrated at the amount of time we are stuck paying rent and ultimately not putting money towards a financial asset. Therefore, with regards to point 7 specifically, this would only make sense if the Lifetime ISA was split into two separate products: one for home purchases that was available to everyone, and one for retirement saving that could be used in place of a workplace pension for those without access to one.

Points 3 and 5, my thoughts on the overall value of the Lifetime ISA:

My personal view is that the Lifetime ISA is good value for money for the government and should not be abolished, assuming the rules are updated to make it better for its intended purpose. As I mentioned above, first home purchase is a topic of great frustration for my generation. Many also see first home purchase as a critical step that should be prioritised before other goals in life (marriage, children being obvious examples), and without help people feel they are unable to do these things.

Points 6, 8, 9, and 10, my thoughts on reforming the Lifetime ISA:

These are the points that affect me personally the most. With regards to point 6, I think at the very least the withdrawal penalty should be reduced to 20% so that there is no penalty if someone is not able to use their Lifetime ISA for reasons they did not foresee when it was opened (for example, buying a home that is over the limit) and they wish to transfer the money to an alternative product for retirement saving. With regards to point 9, I think it would be useful to raise the annual limit from £4000 so that if people do have more to save with their main financial goal being purchasing their first home, they can do so effectively without having the need to research (rates, tax rules etc.) other products.

Point 8 is the one I feel most strongly about. In my current area, the limit of £450,000 is woefully inadequate for the purchase of a house that would be suitable for a young family, and is limited to only being able to cover flats which will be leasehold and come with additional overheads such as service

charges/ground rent and negotiating extensions to the lease. In Wimbledon for example, 3 bedroom houses start at around £500,000 with more options closer to £600,000. If the limit had been raised in line with inflation, it would be over £600,000 and would be suitable for covering properties of this type, as it would have been when it was introduced.

January 2025