Lifetime ISAs leave some with less money than they put in
Summary
Some members of Parliament in the UK are concerned that Lifetime Individual Savings Accounts (LISAs) might not work well for everyone and could result in people losing money if they withdraw their savings early. The Treasury Committee suggests that the government should reconsider how LISAs work, especially since early withdrawals can lead to financial penalties, and savings in LISAs can affect eligibility for certain benefits.Key Facts
- A Lifetime ISA (LISA) is a savings account for people under 40 to save for a first home or retirement.
- Each year, people can deposit up to £4,000, and the government adds a bonus of 25%.
- Withdrawing money early can result in losing 6.25% of the deposited savings.
- Around 1.3 million LISAs are currently active, with 6% of eligible adults having opened one since its launch in 2017.
- The Treasury Committee believes the dual purpose of LISAs could lead to unsuitable savings decisions.
- Rules state that having savings in a LISA can affect eligibility for benefits like universal credit.
- The government is considering changes to ISAs, including LISAs, to promote saving and investing.
- The yearly cost of LISA bonuses to the government is predicted to be £3 billion over five years.
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