LISA0191
Written evidence submitted by The Independent Order of Oddfellows Manchester Unity Friendly Society
Introduction
As a leading LISA provider, we aim to offer an informed perspective on the design, functionality, and accessibility of the product, as well as its alignment with the policy objectives set out by the government. Additionally, we hope we can offer our insight into the potential challenges faced by consumers and providers alike.
The answers have been provided by our key stakeholders within the Society.
It is our view that whilst the LISA would perhaps be simpler to understand there are likely to be many reasons why a house purchase might not take place. Where this did occur customers might find themselves unable to access their savings without penalty whilst simultaneously being unable to purchase a property. An outcome that is likely to result in a bad customer outcome.
An alternative might be to retain the LISA as a combined product but offering greater guidance or education on how the product works.
We would be very happy to provide specific figures on this. However, put briefly, the majority of customers do not engage any further with their LISA once the property has been purchased. There is likely to be several reasons for this, however anecdotally a lot of customers explain to us that they are either, unware they can retain their LISA to 60 (although we are undertaking work to remedy his) or financially unable to, due to the cost of purchasing their house. It is difficult for the majority of customers to see the benefit of putting money away in a product that is not a pension at a time when they are financially pressed.
As a Society we feel it is perhaps not our place to comment on this given the differing objectives, and differing approaches to achieving these objectives, set out by the different Governments during the lifetime of the LISA. However, if we assume the objective of the LISA is to help a way for young people to get on the property ladder then yes, we believe it has value as the revenue both saved and generated by young people purchasing their own property far outweighs any potential Government bonuses.
The LISA was never designed as a pension product and we give risk warnings to this end at purchase. However, we do believe the LISA is a suitable vehicle for retirement planning as an alternative method of tax-free savings providing the 25% Government bonus continues despite the fact it is much less likely workers will be looking to retire aged 60 in future years.
No. It is still a great savings vehicle for first time buyers.
Generally speaking no. The idea of the 25 per cent withdrawal penalty being in place is to ensure that LISAs are used for their intended purposes and to ‘dis-incentivise’ customers from dipping into their savings, and as a result delaying the time at which they will have enough saved to buy their home. If removed, then the government will simply be providing bonuses to a standard ISA product.
However, if reform was necessary one way might be for the bonus to simply be removed.
No. This is not a pension, rather an alternative method of tax free saving suitable for retirement planning.
Raised in line with inflation would be a sensible solution. It is aimed at first time buyers and in most parts of the country £450k is adequate but of course there are areas where it is an issue.
Our stakeholders differed on opinion on this. Whilst some believed it should be possible to still form part of the £20k ISA allowance, there were some concerned about the potential impact of the additional expense to HMRC were the LISA limit be raised and the same % level of bonus was available. .
February 2025