LISA0206

Written evidence submitted by BlackRock

BlackRock[1] is pleased to have the opportunity to respond to the call for evidence on the Lifetime ISA (LISA), issued by the Treasury Select Committee.

BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, we help millions of people build savings that serve them throughout their lives by making investing easier and more affordable.

We welcome the opportunity to comment on the issues raised by this call for evidence and will continue to contribute to the thinking of the Committee on this and other topics.

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BlackRock welcomes the interest that the Committee is taking in the future of the LISA. Since the product launched in 2017, more than 775,000 LISAs have been opened, supporting people to start saving for their first home or retirement. While it is undoubtedly welcome that the LISA is helping people to reach their financial goals, we believe there is significant potential to expand its impact.

Moving forward, we believe targeted reforms are essential to ensure the LISA remains an attractive option for savers. We go through these in more detail below.

Use of the LISA by the self-employed

While the introduction of auto-enrolment in 2012 has been hugely successful in bringing more people into pension saving, many are still excluded.

Research from the Institute of Fiscal Studies has found the fraction of self-employed workers earning over £10,000 who are making contributions to a private pension has been around 20% since the early 2010s, down from 60% in 1998. Given this drastic drop in saving for retirement, there is a need for Government to address gaps in pension coverage for the self-employed.[2]

While we look forward to the second phase of the Pensions Review, which we hope will address this amongst other crucial questions, we believe the LISA has the potential to plug some of this gap. We recommend that the Government review how the LISA could be more clearly positioned as a retirement savings product for the self-employed, especially the self-employed in the 20% tax bracket, as they would get an additional government bonus on top of their savings.

This may include amending the early withdrawal penalty for the self-employed in recognition that liquidity can be a critical issue for this demographic. This could be done by reducing the penalty for any self-employed LISA holders accessing before age 60 to 20%. This acts to recover the government bonus but ensures those needing to withdraw early are not additionally penalised.

Align the LISA to the Minimum Pension Age

In line with the above, if the LISA is to be successful as a product for retirement savings, we recommend is to raise the upper age limit for opening and contributing to the LISA, from its current cutoff at age 40 to the Minimum Pension Age.

This has the dual benefit of supporting the self-employed, the majority of whom are in their 40s and 50s, as well as those in their 40s and 50s, who may have started thinking more seriously about their retirement and want to ‘top up’ their pension savings. [3]

Increase the maximum eligible property value to reflect current market conditions

The LISA has helped 230,300 consumers purchase a property between 2018 and 2024. However, the property price cap has not kept pace with rising house prices.

From the introduction of the LISA in April 2017 to November 2024, UK property prices have increased by 32.5%, yet the LISA purchase cap has not risen.[4] Furthermore, in certain regions, particularly London, this cap is insufficient for first-time buyers.

To ensure the LISA remains an effective tool for homeownership across the UK, we recommend that the Government consult on increasing the maximum eligible property value to better reflect market conditions. This could be done by indexing the threshold to house prices both nationally and regionally, allowing it to adjust in response to market fluctuations.

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Without these changes, the LISA risks falling short of its potential to help support the retirement saving of under-served groups and enable homeownership for first time buyers across the UK.

We look forward to the outcome of the Committee’s work on this important topic and welcome the opportunity to continue our dialogue with you. We will continue to contribute to the thinking of the Committee on any issues that may assist in the outcome.

February 2025