LISA0136

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? 

No. Inflation has eroded the value of the scheme. As a priority, the £450k house price cap should be raised in line with inflation. I am a Civil Servant and so want to live a reasonable commutable distance from Westminster. I am from Essex and the choice of properties available under £450k in Essex isn’t much better than in London.

I am 32 and have been saving into a LISA for many years and have most of my savings in there. I am renting with my girlfriend currently and want to buy a property in the autumn when our contract is up. With our combined salaries and deposits, we could comfortably afford a property that is around £500k. If the house price cap were raised in line with inflation, we would be able to do so.

Whilst the uncertainty continues over reform to the LISA scheme, I am reluctant to put more money in as I may be charged the withdrawal fee later in the year. The scheme was supposed to make life easier for first time buyers, but it’s become very stressful as it’s difficult to find many suitable properties in the current market.  

If the house price cap isn’t removed, and stamp duty returns to previous levels in March, this will greatly impact what we can afford. We will likely be forced to purchase a property of a lower standard, that is further away from our families and friends, to avoid throwing away £000s. We want to start a family in the next couple of years, so moving away from family and friends isn’t a sensible option for us. This is not the sort of outcome the scheme was designed for.

Raising the house price cap in line with inflation would help the Govt achieve growth objectives. 

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 comment.

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

Yes. It provides an effective incentive for people to save towards a deposit.

If vfm is a concern, the scheme could be closed, but those currently in the scheme should be allowed to get the benefit of the scheme as originally intended.

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

No comment.

5. Should the Lifetime ISA be abolished? 

No. That would be counter productive. It is already difficult enough for young people to afford to buy their first home – why make it harder.

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

More exceptions should be provided – e.g. the withdrawal penalty should not be charged if a lifetime ISA holder is purchasing a property at a higher sale price than the house price cap. Given the policy intent is to allow people to purchase a property it is unfair people can be penalised for doing so.

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

No.

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

Yes, as a priority. According to the HPI, property prices have gone up approx. 10% in Greater London since 2017. The

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

Due to inflation £4,000 is worth less today than it was in 2017, so this could be raised in line with inflation e.g. to £5,000.

If there are concerns about vfm for the Govt, this should be a lower priority than raising the house price cap above £450,000, in line with inflation.

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

As per earlier answer, the withdrawal penalty should not be charged if a lifetime ISA holder is purchasing a property at a higher sale price than the house price cap. Given the policy intent is to allow people to purchase a property it is unfair people can be penalised for doing so.

January 2025