>Some people who pay into a Lifetime Individual Savings Account (LISA) may end up getting less money out than they put in, MPs have warned, as they call for the product to be reformed.
>Anyone under 40 can open a LISA to either help save towards retirement or buy a first home. You can put in up to £4,000 a year and the government will top it up by 25%. But the Treasury Committee said if LISA funds were withdrawn early due to unforeseen circumstances, charges mean people face losing 6.25% of their own savings. It also warned the "complex" product may not suit everyone and it might have been mis-sold to people on certain benefits. The government said it would respond to the committee in due course.
>In a new report, the committee said the LISA's dual purpose to help people save for both the short- and long-term "makes it more likely consumers will choose unsuitable investment strategies. Cash LISAs may suit those saving for a first home but may not achieve the best outcome for those using it as a retirement savings product, as they are unable to invest in higher risk but potentially higher return products such as bonds and equities," the report said.
>It noted a surge in withdrawal charges, with almost double the number of people making an unauthorised withdrawal (99,650) compared to those who used their LISA to buy a home (56,900) in 2023-24. The committee said this should be considered a possible indication that the product was not working as intended. First-time buyers can use a LISA to purchase a home up to the value of £450,000, and there have been calls by some to raise this threshold as it has not changed since 2017, while house prices have risen. Some of the unauthorised withdrawal charges may have been for people who used the money to buy a home worth more than £450,000.
>The committee also described the rules which penalise benefit claimants as "nonsensical". Currently any savings held in a LISA can affect eligibility for universal credit or housing benefit, whereas this is not the case for other personal or workplace pension schemes. If that is not changed, the committee said the LISA should be "clearly labelled as an inferior product" to those who may be eligible for such benefits.
>The Office for Budget Responsibility predicts spending on bonuses paid on LISAs will cost the Treasury around £3bn over the next five years. The committee questioned whether the LISA was "the best use of public money given the current strain on public finances" and also raised concerns that the product could be "subsidising the cost of a first home for wealthier people at a significant cost to the taxpayer. We are still awaiting further data that may shed some light on who exactly the product is helping," said committee chair Dame Meg Hillier.
>"What we already know, though, is that the Lifetime ISA needs to be reformed before it can genuinely be described as a market-leading savings product for both prospective homebuyers and those who want to start saving for their retirement at a young age." A Treasury spokesperson said: "Lifetime ISAs aim to encourage younger people to develop the habit of saving for the longer term, helping them to purchase their first home or build a nest egg for when they're older. We welcome the committee's report and will now review its findings and respond in due course."
>The government has previously said it is "looking at options for reforms" when it comes to ISAs to encourage investing money. It has said that while it is important to support people to save, it wants to get the balance right.
https://www.bbc.co.uk/news/articles/c93kgye03j9o
The more I read into this the angrier I get sometimes. They're even complaining now that LISA don't give enough value for money for the Treasury while more people are getting punished for making withdrawals than are being used to for first homes and most people in this country save using a bank account because the view the whole system a scam.
1. Want to buy a home with your LISA? Fuck you. You can't use a LISA to buy a home in a growing amount of the country because house prices have blown passed the 2017 limit which doesn't move and likely never will.
2. Early retirement? Fuck you, there's no obligation or incentive for the government to keep the age of penalty free withdrawals at 60.
3. Fall on hard times and need to use the social safety net you pay for? Fuck you. No bennies until you withdraw and spend that money (and we'll help ourselves to a savers tax). Put it in a pension next time.
4. Parents die and name you as receiving part of the home? Fuck you. Better hope you like living with your siblings because that's your new first home.
In terms of numbers:
The average age of a first time buyer in this country is 34.
If you receive 30k a year through your pension then you qualify as needing winter fuel allowance and the state will do everything in its power to protect you from any misfortune.
How much have house prices risen since 2017? 30%.
