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

masonic

eskbanker wrote: »

...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....!

Easiest solution is to remove the tax relief on future contributions and allow them to be transferred to other types of ISA penalty free.

Alexland

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!

I agree - we have two accounts so are dual beneficiaries. While I agree it's overly complex and the cash house buying and s&s retirement saving objectives get easily confused we are very much enjoying the £2k per year and were hoping the free ride would last a bit longer. With over £1m in assets I do wonder if we are the right people for the government to be 'helping'.

Alex.

aj23_2

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!

Well obviously. As someone who does qualify and will for a long time and lives in the South East, this is a hugely beneficial scheme for me.

You're focusing on using it as a pension. I see it as help towards a deposit primarily, and a a pension secondarily. I already have a workplace pension going.

Anything to encourage people to save for later in life is surely a good thing.

eskbanker

aj23 wrote: »

Well obviously. As someone who does qualify and will for a long time and lives in the South East, this is a hugely beneficial scheme for me.

Yes, that was my point, that it's hardly surprising that those benefitting from the scheme will want to retain it, as you obviously have a vested interest!

aj23 wrote: »

You're focusing on using it as a pension. I see it as help towards a deposit primarily, and a a pension secondarily. I already have a workplace pension going.

Not sure how you've concluded (wrongly) from post #20 that I'm focusing on using it as a pension, although back at post #6 I was highlighting that the Lifetime ISA section is positioned within the retirement savings section of the treasury committee report, which could suggest that this is where they see its primary role.

In post #20 I'm actually agreeing with the contention that it's potentially confusing trying to use the same product for both first-time property purchase and retirement savings, and the logical conclusion from that is that a modified form of HTB ISA makes sense instead of the FTB aspect of LISA, and minor pension reform would seem more sensible than using a separate parallel scheme.

aj23 wrote: »

Anything to encourage people to save for later in life is surely a good thing.

I agree with the principle that government should encourage saving for later life, but wouldn't necessarily agree that this extends as far as anything in that direction is therefore good (regardless of cost), or at least unimprovable. My point was more that the government should be clearer about its objectives and message and analyse exactly who they're targetting and who should need financial incentivisation, as it's clear from the post before yours that some aren't really needing this government assistance.

I'm not hypocritical enough to claim that I wouldn't take advantage of the scheme if I could (in the same way I use other ISAs) but as I say I'm looking at this from the perspective of a taxpayer wanting to ensure that the government is using its funds in the most prudent way, so it seems reasonable for the committee to review and make recommendations rather than blindly continuing with a scheme that they believe (after careful consideration) isn't working as intended....

aj23_2

eskbanker wrote: »

Yes, that was my point, that it's hardly surprising that those benefitting from the scheme will want to retain it, as you obviously have a vested interest!

Not sure how you've concluded (wrongly) from post #20 that I'm focusing on using it as a pension, although back at post #6 I was highlighting that the Lifetime ISA section is positioned within the retirement savings section of the treasury committee report, which could suggest that this is where they see its primary role.

In post #20 I'm actually agreeing with the contention that it's potentially confusing trying to use the same product for both first-time property purchase and retirement savings, and the logical conclusion from that is that a modified form of HTB ISA makes sense instead of the FTB aspect of LISA, and minor pension reform would seem more sensible than using a separate parallel scheme.

I agree with the principle that government should encourage saving for later life, but wouldn't necessarily agree that this extends as far as anything in that direction is therefore good (regardless of cost), or at least unimprovable. My point was more that the government should be clearer about its objectives and message and analyse exactly who they're targetting and who should need financial incentivisation, as it's clear from the post before yours that some aren't really needing this government assistance.

I'm not hypocritical enough to claim that I wouldn't take advantage of the scheme if I could (in the same way I use other ISAs) but as I say I'm looking at this from the perspective of a taxpayer wanting to ensure that the government is using its funds in the most prudent way, so it seems reasonable for the committee to review and make recommendations rather than blindly continuing with a scheme that they believe (after careful consideration) isn't working as intended....

But for most using it, they will be attempting to buy a house before they are able to use at 60 as a pension. Most of the comments here are saying that they opened it in order to get more money together for a house, or as a secondary pension in addition to their workplace pension.

Wildsound

The only aspect of the Lifetime ISA which is good for retirement is the ability to access it if you so wish beforehand (albeit with a small penalty), and even doing this comes with extreme caution.

However, anyone who has a time horizon of more than 5 years (i.e. anyone who opens one for this purpose) I would say that the cash LISA (currently only with Skipton, but soon Nottingham BS will open one) is absolutely NOT the right choice and is extremely damaging as (currently) inflation will eat away at their retirement.

The only option then is to go the stocks and shares route, which I'd say over 95% of people are not in a position to be able to manage themselves through platforms like HL and AJ Bell, so that leaves you having to find the right managed fund yourself and with very limited choice of investments if you pick any of the others available like Nutmeg, Moneybox and Onefamily and pick one of their managed funds/risk profiles.

(for info - me and my other half have approx. £15k each in Lifetime ISAs at HL, purely to be used for buying a house)

aj23_2

Wildsound wrote: »

The only aspect of the Lifetime ISA which is good for retirement is the ability to access it if you so wish beforehand (albeit with a small penalty), and even doing this comes with extreme caution.

However, anyone who has a time horizon of more than 5 years (i.e. anyone who opens one for this purpose) I would say that the cash LISA (currently only with Skipton, but soon Nottingham BS will open one) is absolutely NOT the right choice and is extremely damaging as (currently) inflation will eat away at their retirement.

The only option then is to go the stocks and shares route, which I'd say over 95% of people are not in a position to be able to manage themselves through platforms like HL and AJ Bell, so that leaves you having to find the right managed fund yourself and with very limited choice of investments if you pick any of the others available like Nutmeg, Moneybox and Onefamily and pick one of their managed funds/risk profiles.

(for info - me and my other half have approx. £15k each in Lifetime ISAs at HL, purely to be used for buying a house)

But, as you say, those you don't know, the Cash Lifetime ISA is still fine for them. I'm already £3000 better off than I was 6 months ago from opening with Skipton. Inflation isn't working against me on it. But, as most people have said, they will use it for a house, which is a lot closer than retirement.

Wildsound

aj23 wrote: »

But, as you say, those you don't know, the Cash Lifetime ISA is still fine for them. I'm already £3000 better off than I was 6 months ago from opening with Skipton. Inflation isn't working against me on it. But, as most people have said, they will use it for a house, which is a lot closer than retirement.

Assuming you are a basic rate tax payer, you would have been £3,000 better off had you just contributed the same amount to a workplace pension or a personal pension/SIPP in the form of basic rate tax relief.

A 30 year old contributing to a workplace pension, I can guarantee that they are not 100% allocated to cash. There will be some sort of pension management going on in the background trying to put the investor into something which matches their expected retirement age.

All the Lifetime ISA does is shift the risk and responsibility away from them and on to the consumer.

eskbanker

aj23 wrote: »

But for most using it, they will be attempting to buy a house before they are able to use at 60 as a pension.

Possibly, but I'm not aware of any published statistics confirming this, are you?

Based on the stats at https://www.ons.gov.uk/peoplepopulationandcommunity/housing/articles/ukperspectives2016housingandhomeownershipintheuk/2016-05-25 there were about 18m owner-occupied properties (most occupied by multiple people) but only 200-350k first-time buyers per year, so the latter group may not be as prominent as you might think as a member of it.

aj23 wrote: »

Most of the comments here are saying that they opened it in order to get more money together for a house, or as a secondary pension in addition to their workplace pension.

Again, hardly surprising when those are the two main uses the product is aimed at! I do get that LISAs may currently be seen as a better option than pensions for some (such as self-employed) but IMHO that's a weakness of the current setup and I feel that the government should adjust the pension regime to eliminate that anomaly and concentrate on just one tax-efficient mechanism of retirement planning....

Imelda

I too am a bit baffled as to its purpose. I am a beneficiary too.
I am using it as an additional pension pot. I only work part time, my husband is a top rate tax payer and can only get tax relief on £10k of pension contributions. Alas he is over 40.
I earned £11,500 last year - I contributed £9,200 to a pension and £4,000 to a s&s LISA. The government topped these investments up by £3,300 in total. Surely I am not the target audience and shouldn!!!8217;t benefit to this degree?