Treasury Board to investigate whether LISA is ‘fit for purpose’ – mortgage lending strategy

The Treasury Board has launched a review into whether lifetime personal savings accounts are “fit for purpose”.

The inquiry will ask for evidence on whether financial products first launched in 2016 are still “appropriate financial products”.

Former chancellor George Osborne introduced LISA in the Budget nine years ago to provide another tax-free way to save for retirement while encouraging under-40s to save for a home by providing incentives to get on the property ladder.

The product allows people under 40 to open a LISA and save up to £4,000 a year until they turn 50.

Savers can only withdraw funds from their accounts if they buy their first home, are terminally ill and have less than 12 months to live, or are 60 and over. Withdrawals for any other reason are subject to a 25% fee.

The committee, led by Dame Meg Hillier, will gather input from the financial industry, consumers and experts as it conducts its review.

Brian Byrnes, head of personal finance at Moneybox, said he welcomed the committee’s review of what he described as “an excellent product”.

Moneybox, which claims to be the UK’s largest LISA provider, added: “Latest figures from HM Revenue and Customs (HMRC) show that more than 1.5 million people across the country are currently saving through LISAs.

“Moneybox has seen a 34% increase in customers opening LISAs in the last year alone, demonstrating the growing demand for this product, which has been a real lifeline for thousands of aspiring first-time buyers in recent years. They try their best.

The committee set ten key questions about the product:

• Is the Lifetime ISA suitable for the purposes for which it is currently designed, including as a combined home purchase and pension savings product?
• How effective are consumers using Lifetime ISAs as a transitional product between buying a home and saving for retirement?
• Is a Lifetime ISA good value for money for the government, given its policy purpose?
• Is a Lifetime ISA a suitable pension savings product?
• Should Lifetime ISAs be scrapped?
• Should Lifetime ISAs be reformed to remove withdrawal penalties?
• Should Lifetime ISAs be restricted to those without access to a workplace pension?
• Should the Lifetime ISA house price cap be increased in line with inflation, or removed?
• Should the annual lifetime ISA limit be increased from £4,000?
• Should Lifetime ISAs be reformed in other ways?

Submissions to the committee are due by February 4.