Lifetime ISA should be scrapped, says influential group of MPs - MSE News

Grezmond

I use my LISA as an addition pension saving platform, this also acts as an emergency fund in case the unthinkable happens. I understand that if I withdraw any funds from this pot then I would have to pay 25% back to the government. However, if I put the same money into a pension then it is locked away until I’m in my 60's but more likely 70's (with the way things are heading from the government).
Treasury Committee say it is a complex system. How is it complex? You save for your first house or you save for a pension "simples".
Anything that the government also tops up must be a good thing in my eyes. The Treasury Committee just don’t like to be handing out money and want to force this responsibility on to companies.

Zorillo

I haven't struggled with the complexity. Seems like an ideal way to save for retirement in addition to a company pension, with an emergency break if it's needed.

Leave it alone please.

aj23_2

Zorillo wrote: »

I haven't struggled with the complexity. Seems like an ideal way to save for retirement in addition to a company pension, with an emergency break if it's needed.

Leave it alone please.

I agree with this. It's no complex at all.

aj23_2

Grezmond wrote: »

I use my LISA as an addition pension saving platform, this also acts as an emergency fund in case the unthinkable happens. I understand that if I withdraw any funds from this pot then I would have to pay 25% back to the government. However, if I put the same money into a pension then it is locked away until I’m in my 60's but more likely 70's (with the way things are heading from the government).
Treasury Committee say it is a complex system. How is it complex? You save for your first house or you save for a pension "simples".
Anything that the government also tops up must be a good thing in my eyes. The Treasury Committee just don’t like to be handing out money and want to force this responsibility on to companies.

My primary aim to use for a deposit, but after that will use as an secondary pension. So I agree.

dunstonh

Well it's not, because it depends on your circumstance. A self employed person would be better off using a LISA for a pension than paying into a private pension.

Yet an "own company" director would be better off using personal pension than LISA.
Employees with salary sacrifice available would be better with personal pension.
Higher rate taxpayers are better with personal pensions
Those with high estates are better with personal pensions.

I'm not saying there are scenarios where LISA is not suitable. Clearly there is. However, the way the product is designed to try and meet the goals of two totally different objectives and with it competing with a very similar tax wrapper with pros and cons means it introduces confusion and misunderstanding.

Remember that the average consumer is clueless when it comes to these sort of things. The regular posters here are not a reflection of the general marketplace.

aj23_2

dunstonh wrote: »

Yet an "own company" director would be better off using personal pension than LISA.
Employees with salary sacrifice available would be better with personal pension.
Higher rate taxpayers are better with personal pensions
Those with high estates are better with personal pensions.

I'm not saying there are scenarios where LISA is not suitable. Clearly there is. However, the way the product is designed to try and meet the goals of two totally different objectives and with it competing with a very similar tax wrapper with pros and cons means it introduces confusion and misunderstanding.

Remember that the average consumer is clueless when it comes to these sort of things. The regular posters here are not a reflection of the general marketplace.

That's why I said self-employed, like a plumber, electrician, etc. The opposite of what you've listed, as they wouldn't get the incentives and tax relief like those you've listed.

Wildsound

I agree with dunstonh on this, it is a terrible product in the fact it is catering to two different financial goals in the same product.

It has been terribly advertised by the government - the amount of people I come across who know what a HTB ISA is but have never even heard of a Lifetime ISA is vast. For the lucky people who come to this forum, I'm able to, at least, educate them on it. They are generally shocked when I tell them that it is literally a better version of the HTB ISA in almost every single way.

What they really should have done is changed the way the HTB ISA functions, making it essentially what the LISA does, but without the up to age 60 bit - ie:
1) Giving people the option to go stock and shares if they have longer term plans
2) Increased the annual contribution rate
3) Take away some of the restrictive conditions that the HTB ISA has at the point of purchasing the property, which the LISA currently doesn't have.
4) Increase the property purchase price to £450k across the board

As it stands, I'm in this terribly annoying position where I am recommending first time buyers to max out a HTB ISA for the generally higher rates of interest, whilst also recycling money from high interest monthly savers and dumping into the LISA at maturity. Then using the LISA for the purchase, and then closing the HTB ISA with no actual penalty as you can only use the bonus from one.

Then you have the fact that as a result of this mess, the government is surprised that barely any provider is touching this kind of product - I don't blame them!

Let's hope the government don't punish those who have been savvy enough to save into both as a result of their incompetence to create a simple and clear product...

dunstonh

That's why I said self-employed, like a plumber, electrician, etc. The opposite of what you've listed, as they wouldn't get the incentives and tax relief like those you've listed.

Have you seen how often company directors refer to themselves as self employed on this board?
Indeed, when Hammond tried to increase NI paid by the self employed, many of those saying they were going to be worse off were not self employed but directors.

eskbanker

Perhaps unsurprisingly, many of the above comments are from those who are beneficiaries of the LISA, who will naturally be inclined to resist a suggestion of abolishing it!

As one who doesn't qualify (on age grounds) I don't really have any skin in the game as a beneficiary, but as a taxpayer I'd question what the government's objectives are in using this product to dish out state funding to both populations (FTBs and OAPs, to use a convenient TLA that may no longer be an approved term!). This is where some of the committee witnesses were coming from, in highlighting that the government should be clear about what effect it's trying to create and how best to do it, in a cohesive and understandable way. If the government has already paid bonuses of £130m in the first year, it must be assumed that this figure will rise in this and future years and so to me it's not unreasonable to ask if this is delivering the right benefits, not just for the individuals concerned but for UK plc.

I suspect that it would be better to ditch LISA while tweaking HTB to minimise variations and adjusting the pension regime to incorporate some form of government contribution for those who this is targeting, but I'm sympathetic to those who've already opened a LISA so there would need to be some sort of transitional arrangement. Easier said than done of course....!

Rich2808

eskbanker wrote: »

Perhaps unsurprisingly, many of the above comments are from those who are beneficiaries of the LISA, who will naturally be inclined to resist a suggestion of abolishing it!

As one who doesn't qualify (on age grounds) I don't really have any skin in the game as a beneficiary, but as a taxpayer I'd question what the government's objectives are in using this product to dish out state funding to both populations (FTBs and OAPs, to use a convenient TLA that may no longer be an approved term!). This is where some of the committee witnesses were coming from, in highlighting that the government should be clear about what effect it's trying to create and how best to do it, in a cohesive and understandable way. If the government has already paid bonuses of £130m in the first year, it must be assumed that this figure will rise in this and future years and so to me it's not unreasonable to ask if this is delivering the right benefits, not just for the individuals concerned but for UK plc.

I suspect that it would be better to ditch LISA while tweaking HTB to minimise variations and adjusting the pension regime to incorporate some form of government contribution for those who this is targeting, but I'm sympathetic to those who've already opened a LISA so there would need to be some sort of transitional arrangement. Easier said than done of course....!

I am tempted to agree.

Is the lifetime isa a pension savings vehicle – well why not just have a pension as you get tax relief on that – or a first time buyer savings bonus scheme – well couldn’t they just reform the help to buy isa (e.g. make the property value limit £450k nationally and increase the monthly payments allowed so you can build up any bonus faster).

None of the big banks and societies offer the cash version – so you are left with the Skipton (nationally) and Nottingham (only in branches). Clearly more options for stocks and shares isas – but they may not be the best vehicle for saving for a home.

Its also rather arbitrary – why does a 39 year old renter need help to buy a first home but not a 40 year old. And again you lose the bonus if you withdraw the cash for anything bar a first home purchase.

It just seems overly complicated with limited offerings and an arbitrary age limit.