Treasury Committee probes whether Lifetime Isa is still fit for purpose in 2025
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The Treasury Committee is seeking views on whether the Lifetime Isa is still fit for purpose in 2025. Lifetime Isas (Lisas) help people save for their first home – if the property costs £450,000 or less – or their retirement. Withdrawing cash for any other reason, unless someone is terminally ill, can trigger a penalty.
Savers face a charge of 25% for making an unauthorised withdrawal. The account was introduced in 2016, but there have been calls to overhaul its design. The £450,000 property purchase cap for first-time buyers has attracted criticism, with house prices having surged in recent years.
Data obtained last year from HM Revenue & Customs (HMRC) and published by money app Plum showed that in the tax year 2022-23 the average of the top 25 penalties paid for unauthorised withdrawals was £11,000. People under the age of 40 can open a Lisa to contribute up to £4,000 each year until they are 50. The state adds a 25% bonus to Lisa savings, up to a maximum of £1,000 per year.
The Treasury Committee is aiming to gather views from the finance industry, consumers and experts. MPs want to hear views on questions such as whether the current design of the Lisa is fit for purpose, including as a combined product for house purchase and pension saving.
They also want to know whether, given its policy purposes, the Lisa represents value for money for the Government and whether the withdrawal penalty should be removed. Other questions MPs are seeking views on is whether the Lisa should be scrapped altogether, or whether it should be restricted to those with no access to a workplace pension.
