Treasury Committee Investigates Lifetime Isa’s Relevance for 2025
The Treasury Committee is reviewing the Lifetime Isa to determine its effectiveness and relevance for savers in 2025
Lifetime Isa, Treasury Committee, Savings, UK, Home Purchase, Retirement
London: The Treasury Committee is diving into whether the Lifetime Isa (Lisa) is still a good deal for people in 2025. They want to hear from everyone—consumers, finance pros, and experts.
These Lisas are designed to help folks save for their first home or retirement. But if you take money out for anything else, you could face a hefty penalty unless you’re seriously ill.
Introduced back in 2016, the Lisa has a cap of £450,000 for first-time homebuyers, which has raised eyebrows given how house prices have shot up lately.
Last year, data showed that the average penalty for unauthorized withdrawals was around £11,000. Ouch! People under 40 can put in up to £4,000 a year until they hit 50, and the government throws in a 25% bonus on those savings.
The committee is asking if the current setup is still working. They want to know if the Lisa is worth it for the government and if the withdrawal penalty should go. Some are even suggesting it might be time to scrap the Lisa altogether.
They’re also considering whether to raise the house price cap to keep up with inflation. The deadline for feedback is February 4, so there’s still time to weigh in.
Tom Selby from AJ Bell thinks this review is a great chance to fix some of the Lisa’s issues. He believes the early withdrawal penalty should be less harsh, similar to what was done during the pandemic.
Helen Morrissey from Hargreaves Lansdown suggests that allowing contributions up to age 55 could open the door for more people. She points out that while the government’s 25% bonus is a big draw, the exit penalty can really sting and might discourage saving for homes or retirement.
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