The Treasury Committee has launched a review into whether the Lifetime Individual Savings Account is “fit for purpose”.
The probe will call for evidence to ask if the financial product, first introduced in 2016, remains “an appropriate financial product”.
Former Chancellor George Osborne introduced the LISA in a Budget nine years ago, to provide an alternative method of tax-free saving for retirement, while at the same time encouraging people under 40 to save for a home by offering incentives to get on the property ladder.
The product allows people under 40 to open a LISA and put in up to £4,000 each year until they’re 50. At the end of each tax year, this is topped up by a 25% bonus from HMRC.
Savers are only able to withdraw their money from the account if they are either buying their first home, terminally ill with less than 12 months to live, or aged 60 and over. Withdrawal for any other reason comes with a 25% charge.
The committee, led by Dame Meg Hillier, will gather views from the finance industry, consumers and experts while it conducts the review.
Moneybox head of personal finance Brian Byrnes says he welcomed the committee’s review into what he called “a fantastic product”.
Moneybox, which claims it is largest provider of LISAs in the UK, adds: “Recent HMRC data shows that more than 1.5 million people are currently saving with a LISA across the country.
“In the last year alone, Moneybox has seen a 34% increase in customers opening a LISA which illustrates a growing demand for a product that has been a true lifeline for many thousands of aspiring first-time buyers in recent years as they did all they could to navigate challenging market conditions.”
The committee has set ten key questions it will ask about the product:
- Is the Lifetime ISA fit for purpose in its current design, including as a combined product for house purchase and pension saving?
- How well do consumers transition between using the Lifetime ISA as a product for house purchase, to then a product for pension saving?
- Given its policy purposes, is the Lifetime ISA value for money for the Government?
- Is the Lifetime ISA a suitable pension savings product?
- Should the Lifetime ISA be abolished?
- Should the Lifetime ISA be reformed to remove the withdrawal penalty?
- Should the Lifetime ISA be restricted to those with no access to a workplace pension?
- Should the Lifetime ISA house price cap be raised in line with inflation, or removed?
- Should the annual Lifetime ISA limit be raised from £4,000?
- Should the Lifetime ISA be reformed in any other way?
Submissions to the committee should be sent by 4 February.
