LISA0153
In 2019, I opened a Lifetime ISA to save for my first house, with the £450,000 cap seeming manageable. Fast forward seven years, I’m married with a baby and a dog, renting just outside London. Buying a suitable first house is impossible at the current LISA cap.
My wife and I have saved nearly £65,000 in our LISAs. Buying above the threshold forces us to withdraw and pay a 25% penalty, losing over £15,000! On top of that, rising stamp duty costs an additional £11,000. Imagine losing £26,000 when money is already tight!
I now realize the government isn't supporting first-time buyers, and the Lifetime ISA, in its current state, is not fit for purpose. This needs to be fixed by updating the house price cap.
From the point of view of saving for a first house as that is the only function im using it for:
1. Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?
Currently not fit for house purchasing purpose in the South East of England
2. How well do consumers transition between using the Lifetime ISA as a product for house purchase, to then a product for pension saving?
Sadly I cannot transition from house buying to pension saving as all the money is needed for buying the house. And, like a lot of people, my house is going to be a large portion of my “pension”.
5. Should the Lifetime ISA be abolished?
No, but it must be reformed!
6. Should the Lifetime ISA be reformed to remove the withdrawal penalty?
Not necessarily removed, but perhaps the government's contribution could be returned. Or with interest i.e. 20% penalty.
8. Should the Lifetime ISA house price cap be raised in line with inflation, or removed?
Yes. 100%! This MUST be changed. Ideally the cap be removed - I’m not sure of the function the cap serves. Failing that - in line with inflation and suitable for buyers in the South East.
9. Should the annual Lifetime ISA limit be raised from £4,000?
£4,000 is fair.
February 2025