LISA0184

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, I believe the limits for buying a house are no longer fair and it doesn’t make sense for anyone planning on using it for pensions as there are better long-term savings options available.

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

In my case, I stopped contributing to it this year when I realised it no longer makes sense for either of its purposes.

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

Probably in the wrong ways, I know a few people that have got back less than they put in when they realised the house limit is no longer suitable

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

No, let’s say your pot is 100k, a conservative 5% return in a stocks/shares ISA would beat the LISA. There are also competitive fixed rate saving options with far more flexibility.

5. Should the Lifetime ISA be abolished?

No, it can help however, it should be periodically revised

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

It is understandable to impose a withdrawal penalty however, there should be a fair way to get out of this scheme if you decide it’s not for you. Personally – the most shocking/devastating point is that you can’t TRANSFER to another ISA….you can only withdraw it therefore taking a 25% hit on the whole pot including any earned interest plus, it would then count as NEW contribution in that tax year if you want to move it to another ISA, you end up being trapped in this scheme if you decide it doesn’t work for you.

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

No, some workplace pension schemes are extremely low, based on my experience.

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

Raised at the very least, this scheme was fair when it came out however, it no longer makes sense and you may end up being trapped in the scheme and disappointed when it comes to finally being able to buy a property, unless you look far outside of London and factor in very high travel costs. I work from office 5 days a week; most companies are returning to at least 4 days. Many first-time buyers are also looking to start a family or have already started one and have high childcare costs too.

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

Like the price cap on houses, this should be periodically reviewed too.

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

Allow the ability to transfer to another ISA without it being “new contribution” – government can still take a withdrawal charge before transferring. There needs to be a better way to get out of the scheme that is fair to both parties. If a person contributed 4k over 4 years (16k) plus the 4k GOVT bonus (total 20k), if they decide they want to get out they would only get back 15k…. i.e. the GOVT/Provider walks away with 25% return on the 4k bonus they “lent” and the consumer walks away -1k down + all the opportunity cost of interest they could have earned if invested elsewhere. Many people would have fallen victim to this once they realise the house cap prices are no longer fair but SEEMED fair at the time they decided to open the ISA, or even just circumstances changing, i.e. they were single when they opened a LISA but have subsequently met and settled down with a person who owns a flat, now they wish to withdraw.

February 2025