The Government has not
heeded warnings from the Treasury Committee that the Lifetime ISA
(LISA) requires reform.
In its report, the Committee
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.
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.
Although the Government's willingness to consider including such
a warning is welcome, it falls short of a concrete commitment to
address that issue.
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 comment
Chair of the Treasury Select
Committee, Dame MP said:
“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.”
