LISA0198

Written evidence submitted by JP Morgan Chase

 

 

Own name response to the House of Commons Treasury Select Committee Call for Evidence on LISAs

 

  1. Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?

While the LISA offers clear benefits to both first-time buyers and those saving for their retirement, having dual purposes within a single wrapper has the potential to create confusion for consumers.

 

The benefits of the LISA for first-time buyers have generally been well promoted; such as receiving a 25% government bonus on contributions and more consumer-friendly use than the Help to Buy predecessor.

 

For those using the LISA as part of their retirement planning the benefits; such as withdrawals free from income tax, have been less well promoted.

 

Any attempts to reform the Lifetime ISA should consider the needs of both first-time buyers and those using a Lifetime ISA for their retirement.

 

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

We don’t think there are any issues with the transition process itself should customers wish to use it. However, we would note the LISA is only 10 years old so it is difficult to comment on whether consumers are finding the pension saving element of a LISA effective. 

 

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

 

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

The LISA is not an effective pension savings product compared to personal pensions, SIPPs and pensions with employer contributions. However, the LISA may offer benefits when used in conjunction with one or more of these pension products. In particular, individuals may want to leverage the inheritance tax benefits of a LISA should the government bring pensions into scope of IHT. Currently, while LISAs will form part of an estate, any remaining money in a LISA is free to withdraw. 

 

  1. Should the Lifetime ISA be abolished?

No. The LISA is an effective product for first-time buyers and helps make home-ownership accessible.

 

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

Yes, the withdrawal penalty is excessively punitive. The penalty does not account for a change in life circumstances where an individual may not need the LISA anymore, e.g. inheriting property, or where an individual moves abroad or becomes redundant. In the latter cases, an individual would lose some of their original capital in addition to the government bonus, adding increased burden to already stressful life events.  While some friction to withdrawals helps consumers remain focused on goals, there should be mechanism for those who can no longer use a LISA or whose life circumstances change.

 

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

No. As noted in our response to question 4, should the LISA continue to be used as a product for retirement savings, it is most beneficial as a supplementary product. Furthermore, an individual without a workplace pension can still access alternatives in the form of SIPPs and a personal pension so it is unclear why a LISA should be restricted to those without workplace pensions.

 

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

Yes. The Land Registry data shows that the average house price in the UK has increased more than 30% since the LISA was introduced, but the cap has not increased. Not increasing the cap to reflect increasing property prices is at odds with the objective of the LISA to facilitate home ownership. The government may also see an increase in stamp duty receipts if individuals are incentivised to save for a property above the first-time buyer stamp duty threshold (which reduced from £500,000 to £300,000 as of April 2025).

 

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

A phased increase of the annual allowance would be welcomed – again given the increase in property prices since the introduction of the LISA.

It may also be worth considering whether the LISA should have a standalone allowance – rather than using part of the overall £20k ISA allowance. This could help more targeted support for specific goals.

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

It may be worth considering extending the upper age limit for opening a LISA, currently set at 40, given the average age of a first time house buyer in the UK is 36. It would also be worth extending the period for which contributions can be made. The upper age limit of 50 prevents individuals from using the LISA to meaningfully save for retirement in a period where they may be best placed to do so financially. 

 

A further option may be to create a more distinct link between Junior ISAs (JISAs) and the Lifetime ISA, to help young adults get on the property ladder more quickly. For example, when a child with a JISA becomes 18, there could be an option for them to turn the JISA into a LISA and start saving for a deposit. 

 

 

 

February 2025