The Treasury Committee is currently undertaking a review into the Lifetime ISA (LISA) product to understand if its original design continues to meet the needs of young savers, now and into the future. As the largest provider of LISAs in the UK, in recent years we’ve been calling on the government to review the Lifetime ISA product rules to ensure they continue to reflect changing market conditions. We see the Committee’s Call for Evidence as a sign of positive momentum and an exciting opportunity to ensure the LISA is future proofed so that it continues to provide much needed support to the next generation of young savers across the UK.

Since 2017, c.1 million young people have chosen a Moneybox LISA to kickstart their savings journey and so we were pleased to be able to provide written evidence which showcased the transformative impact LISA has had. As well as helping hundreds of thousands of young people buy their first home, the LISA has changed the saving behaviours of a whole generation, helping build and embed positive saving habits, boosting financial confidence, and enabling long-term financial planning at an earlier stage in life. In fact the vast majority (79%) of Moneybox LISA savers recently told us that they’d consider using their LISA to supplement their retirement savings and 47% of them are already planning to keep contributing to their LISA after they purchase their first home in order to grow their pension pot.¹

Looking to the future, we’re asking the government to commit to an annual review of the price cap in line with house price inflation. This simple measure will reassure savers that this product remains ‘a product for life’ and their efforts to save for a home will remain effective in the face of fluctuating housing costs. To date, more than 227,600 first-time buyers have already used a LISA to purchase a home² and the number of successful LISA enabled home purchases grows each year.³

We’re also advocating for the need to adjust the unauthorised withdrawal penalty while preserving the long-term savings intent of the LISA. We believe the current 25% penalty is overly punitive and a strong disincentive for more young people to avail of all the benefits offered by the LISA.

Reducing the withdrawal penalty from 25% to 20% or introducing an annual penalty-free withdrawal allowance would provide savers with much-needed flexibility and peace of mind.

We believe that with continued awareness, accessibility and future-proofing, the LISA has the potential to transform the financial prospects of young people for generations to come.

 

¹ Internal Moneybox data

² HMRC LISA Tables

³ HMRC, ‘Commentary for Annual savings statistics,’ September 2024, Link

 

A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.

Tax treatment depends on individual circumstances and may be subject to change in the future.