Ministers are facing criticism for insufficient reforms to Lifetime ISAs (LISAs), according to the Treasury Committee. With the November Budget approaching, MPs are questioning whether the current structure of LISAs represents a prudent use of taxpayer money, projecting a cost of £3 billion to the government over five years.
LISAs are available to individuals under 40, allowing them to save for retirement or purchase their first home, with contributions of up to £4,000 per year supplemented by a 25% government bonus. The committee highlighted issues surrounding the product, noting that it is often mis-sold and may not be suitable for all users. This follow-up comes after a June report identified significant deficiencies in LISA marketing and accessibility.
Dame Meg Hillier, chair of the committee, asserted that while the government has made some improvements, comprehensive reforms are still needed, emphasizing that the current system can confuse potential users. Since their 2017 introduction, only 6% of eligible adults have opened a LISA, with about 1.3 million accounts remaining.
The dual purpose of LISAs—encouraging saving for both short-term and long-term goals—has led to concerns about consumers selecting inappropriate investment strategies. Research by HM Revenue and Customs indicates that 87% of LISA users who purchased homes claimed they could have done so without the product. This raises questions about its value as a taxpayer investment.
Current LISA regulations are also under scrutiny, as savings can impact eligibility for benefits such as universal credit or housing benefits, a concern described by the committee as “nonsensical.” The government has responded by stating they will review LISA policies, aiming to clarify how savings affect benefit entitlements.
Source: https://www.bbc.com/news/articles/cge27j499yyo?at_medium=RSS&at_campaign=rss