LISA0141
Written evidence submitted by Anonymous
Call for Evidence - Lifetime ISA.
1. Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?
No. Please see below.
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 view.
3. Given its policy purposes, is the Lifetime ISA value for money for the Government?
It’s recognised that measures to support house purchase serve to increase house prices so the answer is probably no with regard to the house purchase purpose. Economic analysis could determine the extent to which the Lifetime ISA inflates property prices. Such inflation represents a transfer of money from taxpayers (via the government) to existing homeowners and the shareholders of housebuilding companies.
4. Is the Lifetime ISA a suitable pension savings product?
Possibly for those on basic rate tax or who do not have access to workplace schemes with employer contributions. This need could be met through SIPP arrangements.
5. Should the Lifetime ISA be abolished?
Yes. The house purchase element offers poor value for money and SIPPs could cater for the pension element.
6. Should the Lifetime ISA be reformed to remove the withdrawal penalty?
The penalty is aggressive given the lack of flexibility in the scheme.
7. Should the Lifetime ISA be restricted to those with no access to a workplace pension?
No. This would be highly complex as people change between jobs. Complexity with pensions is already unhelpful and government agencies struggle to administer present arrangements. See for example long delays for teachers to obtain pension valuations and disarray at MyCSP.
8. Should the Lifetime ISA house price cap be raised in line with inflation, or removed?
Yes.
It’s wrong and unfair that the cap has not been raised already. I can see no policy objective that this serves.
I would recommend removing the house price cap entirely. People are buying houses later and may want to purchase a family home. I can see no policy objective served by the existence of a cap. Removing the cap would represent valuable deregulation and help young people who wish to start families. In turn this would improve UK demographic trends and public health by permitting family formation to begin earlier.
9. Should the annual Lifetime ISA limit be raised from £4,000?
The Lifetime ISA should be abolished.
10. Should the Lifetime ISA be reformed in any other way?
In some cases couples wishing to purchase a house will both have LISAs. It would make sense to allow multiple Lifetime ISAs to be utilised on the same property purchase. The present arrangements mean that young people wishing to start a family may be forced to leave a proportion of their assets tied up for the long term at a time when they want to buy a family home and are entering an expensive stage of life.
February 2025