LISA0124
Written evidence submitted by Anonymous
My name is xxxxx xxxxxxx. I am 61 years old and own my home in Epsom, Surrey with my husband. We bought our first house (a three bedroom Victorian terraced house) in East London when we were 24 years old. I have three sons, aged 29, 27, and 23.
My sons are educated to university level. They have been encouraged to spend wisely and save whenever possible. The Lifetime ISA was introduced while my eldest son was at university and he opened an account as soon as he could. All three sons have opened Lifetime ISAs and saved as much as they could afford. My two eldest sons now have a substantial amount for a deposit.
However, my eldest son is unable to buy a suitable property with his girlfriend. They work in professional jobs in south west London and would like to buy a house in Wimbledon or nearby. They have enough earnings and deposit together to afford a house but the limit on using their Lifetime ISA means they are stuck renting. The only properties available in their area under the current limit are not suitable for a couple who may be planning a family in the future.
No. It is not flexible enough to cater for all young people wishing to buy their first property in certain parts of the country. The Lifetime ISA may work as a combined product, but my sons haven’t seriously considered it as a means for saving for retirement as they have or expect to have workplace pensions.
2. How well do consumers transition between using the Lifetime ISA as a product for house purchase, to then a product for pension saving?
I can see that this might be forced on consumers if the Lifetime ISA isn’t flexible enough to help them buy their first home, due to the limit on purchase price. They would have to pay the withdrawal penalty or repurpose the saving. Many will be counting on the money saved in the Lifetime ISA to finance their deposit and so will not be able to transition but will need to withdraw their savings or continue renting.
3. Given its policy purposes, is the Lifetime ISA value for money for the Government?
I would hope the Government will think it is value for money. The difficulties for young people trying to buy their own home is well known and seems to be getting worse. Any product that can help hardworking young people move out of rented accommodation and into their own home is valuable.
4. Is the Lifetime ISA a suitable pension savings product?
Surely not as suitable as it is a means for saving to buy a property. The Lifetime ISA has very good competition from Workplace pension schemes which are regulated. There are no other schemes to help young people save specifically to buy their own home.
5. Should the Lifetime ISA be abolished?
No. I really hope it will not be abolished. There is little enough help as it is for young people today. They are already paying more tax and paying off loans for their education.
6. Should the Lifetime ISA be reformed to remove the withdrawal penalty?
It depends on what other regulations/restrictions you put in place. It doesn’t seem equitable to provide a savings scheme with the generous Government bonus which could then be used for any purpose. If you removed the withdrawal penalty only in the case where a person is buying a property (over the current limit) or wants to use the money saved to buy an annuity/private pension that would seem fair. But a saver shouldn’t be allowed to get the 25% bonus from the government and then decide to spend it on a holiday for example.
7. Should the Lifetime ISA be restricted to those with no access to a workplace pension?
No. Not unless you split it into 2 separate products, one for pension and one for house purchase.
8. Should the Lifetime ISA house price cap be raised in line with inflation, or removed?
YES. This would help about 90% (I’m guessing) of the people who have had to pay the withdrawal penalty. Either option would help enormously. It would also help if, for example, two people are buying a property together to allow both to apply the limit (if there is one). So that, with the current limit of £450,000 two people would be able to buy a property up to a limit of £900,000.
9. Should the annual Lifetime ISA limit be raised from £4,000?
This is an interesting idea. If the Government can afford to raise the limit, it would obviously help those young people who are able to save more.
10. Should the Lifetime ISA be reformed in any other way?
The main reform would be to raise or remove the house price cap. Or allow two people to both use their limit – see my example in point 8.
January 2025