MPs push for changes to the UK’s Lifetime ISA
MPs have criticised the government for not heeding warnings that the country’s Lifetime ISA (LISA) requires major reform.
In a report published on Wednesday (10 September), the Treasury Committee said it was unconvinced that the LISA effectively targets people in genuine need of financial support. However, the Government has not taken this opportunity to set out a plan for reform, MPs said.
In addition, MPs called for LISA savings to be treated in the same way as other pension savings in relation to the Universal Credit means test.
In the absence of such reform, the Committee argued that LISAs should be labelled as an inferior product and include warnings that they may disadvantage anyone who might one day claim Universal Credit.
MPs had also warned that the LISA’s dual-purpose design may be diverting people away from more suitable products and putting part of their savings at risk. The government has committed to working with LISA providers to improve the messaging around the product, but it did not set out what that would look like in practice.
Chair of the Treasury Select Committee, Dame Meg Hillier MP said the government needs to adopt a more proactive stance to push through the proposed changes.
“The government has taken some steps towards improving the Lifetime ISA, but I do not believe they have gone far enough. The Lifetime ISA is a confused product that requires reform.
“Recently published research by HMRC based on a sample of LISA holders found that 87% of those who had used their LISA to buy their first home said that they could have done so without their LISA. Given that the LISA is forecast to cost the Government £3 billion over the next five years, this raises the question whether the LISA is a good use of taxpayers’ money.”
“The government has an opportunity at the Budget to think again on the LISA for would-be first-time buyers and those saving for retirement alike,” she said.
