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MPs are urging ministers to take further action in reforming Lifetime Isas (LISAs) as the Treasury Committee has warned that the current reforms are insufficient. Despite previous warnings that these products may not be suitable for everyone, MPs questioned whether LISAs, in their current state, are a wise use of taxpayer funds, with a projected cost to the government of £3bn over five years.
Individuals under the age of 40 have the option to open a LISA to save for retirement or to purchase their first home. Contributions of up to £4,000 per year can be made, with the government adding a 25% top-up. In a report released in June, the committee identified mis-selling of LISAs and emphasized that the product may not cater to all individuals. Following the government’s response to their report, MPs are calling for more extensive reforms.
Dame Meg Hillier, who chairs the committee, expressed concerns about the current state of LISAs, stating that while the government has made some improvements, it has not gone far enough. The dual nature of the LISA, designed for short-term and long-term savings, increases the likelihood of consumers selecting unsuitable investment strategies, according to the committee’s report.
Introduced in 2017 by the Conservative government, approximately 6% of eligible adults have opened a LISA, with about 1.3 million accounts still active. Research conducted by HM Revenue and Customs revealed that 87% of LISA holders who used the account to purchase their first home could have done so without its assistance. The government has acknowledged the concerns raised by the committee and stated that all aspects of LISA policy are under review
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