LISA0154

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?

Both purposes are essential for the younger generations - the last bastion of Generation X, and both Gen Y (Millennials) and Gen Z.

1)      House price to income ratios are still ridiculously high. There is no way individuals can, on the salaries they are earning and with the prices of everything having risen exponentially, afford to save enough for a sizeable deposit without the help that a Lifetime Isa can bring.

2)      For Gen X and Millennials who may already own their own home, the LISA is the only product that is guaranteed to give them a pension they can take at age 60. With people expecting to work for much longer in life, thanks to the elimination of DB pensions and the paucity of workplace DC pensions, the likelihood is:

a)      That younger generations expect to work until their late 60s, early 70s

b)      That they will need to shore up their household income between age 60 and at whatever age the State Pension will kick in.

c)      The uncertainty that the state pension will be around in its current form for a 22-yo starting work today makes the LISA an essential lifeline.

2) How well do consumers transition between using the Lifetime ISA as a product for house purchase, to then a product for pension saving? 

This seems a ridiculous question, in that it has only been going for 7 years. In that period, only a few will have been able to use it for a house purchase, so your call for data on that will not yield a substantive data base on which to make a decision.

However, as a means of saving and as a means of incentivising for people to save, the LISA has proved invaluable, and I have encouraged, with my knowledge of UK financial services, many young people to take it out and benefit from the long-term savings security it can bring.

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

Can you afford to keep giving people a State Pension? Consider the GAD and ONS predictions for the proportion of people in Britain aged 55 and over within the next 5 years, let alone 10 years.

If you politicians can think longer-term than just the next General Election, you will realise we are heading for a pensions bombshell, where we can no longer support a state pension. This is why the Lifetime ISA is a benefit to government - people who have saved for 10 or 20 years into a LISA will be able to defer taking their workplace pension and maybe even defer taking their state pension - helping to shore up the coffers of the UK.

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

It’s a retirement savings product, not a pension product. A pension is a different beast altogether. Call it what it is - a long-term savings plan that pays out when you are 60.

5) Should the Lifetime ISA be abolished?  No

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

Not to remove it - I would reduce it to maybe 10%. You need both stick and carrot when it comes to making people self-sufficient. That said, people have been through cost-of-living crisis after crisis, and there may be exceptional circumstances in their lives when they desperately need to access their long-term savings. Reducing from 25% to 10% would soften the blow.

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

No - because you assume the workplace pension is sufficient. DWP and WPC have both heard evidence over the past 10 years showing that automatic enrolment needs to be changed to increase pension contributions - or people will be ‘sleepwalking’ into poverty in retirement. (Steve Webb, former pensions minister, now at LCP)

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

No, because house prices could fluctuate too much. What if they collapse?

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

It should be raised to £5,000 but I do not think the government should pay more than £1,000 still. Take the gov’t % contribution down from 25% to 20% and increase the overall to £5,000.

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

As above - allow individuals to put more in, within their ISA allowance, but cap the gov’t contribution at 20%.

ALSO - raise the maximum age to 55, given government statistics showing the likelihood of people living longer than previous generations, and working for longer.

February 2025