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

Alexland

Imelda wrote: »

Surely I am not the target audience and shouldn't benefit to this degree?

Just goes to show how complicated taxation gets. Now that we have optimised our pension and LISA arrangements and are receiving child benefit again our net tax posiiton has substantially improved but we are still paying council tax, road tax, VAT, etc. We are having a few good years but have historically been (and probably still are) net contributors to the government.

Alex

jimjames

aj23 wrote: »

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.

I think that is a big generalisation. I can see a pension being a superior option for people than a LISA, at least with current tax relief which can be more than you get in a LISA. Everyone gets tax relief on pension (within limits)

The whole concept of mixing pension and house purchase seems a bit odd to me. Ideally the earlier you can start pension investments the better to give the maximum possible time for compounding but LISA means those early amounts are more likely to be taken for a house instead.

Alexland

jimjames wrote: »

I can see a pension being a superior option for people than a LISA, at least with current tax relief which can be more than you get in a LISA. Everyone gets tax relief on pension (within limits).

But then for someone basic rate, whose has some pension which will use their income tax allowance and whose employer does not offer NI savings then a LISA would beat a pension due to the no tax on withdrawal. It really depends on cirucmstances as to which is better.

I get the feeling most plumbers in my area should be higher rate taxpayers....

Alex

darkidoe

I think the LISA is not a great solution to helping FTB getting on the housing, more like a band aid to try solve the issue. The housing cost issue is a supply issue and if there's more policies to build and encourage home ownership, house ownership would be more achievable for the average earner.

As pensions, the benefit is earlier withdrawal, but why set different age limits?? It can get all very confusing. Obviously for people who knows how to play the game, it will work fine.

rachlikeswinter

Do correct me if I’m wrong, but I was under the impression that when schemes/accounts like these are scrapped, they’re scrapped for new people wanting to open one; existing customers can keep them; at least for a while until an alternative is dreamt up…?

Surely then hypothetically, if they did scrap LISAs and you’re someone (like me) with a good £10k or so in there but not close enough to buying a house yet, they’d switch off the govt bonus eventually, but allow you to withdraw/move your money to an alternative ISA-type vehicle without occurring the 25% charge….? (Similarly same type of thing for the pension savers too) Yes we don’t get any more bonuses but they can’t take away from us what they’ve already given surely?*

*I know they could but… morals?

masonic

A quite reaonable view for them to take is that existing LISA holders can stop funding their LISA and continue to be bound by the rules around withdrawals - they can still use their LISA to part-fund a house purchase as a FTB, or withdraw penalty free at 60+.

Allowing transfers to other types of ISA penalty free would be very nice, but it wouldn't be immoral of them to prevent you from doing this penalty free unless the providers start lobbying to be able to close them.

Alexland

rachlikeswinter wrote: »

*I know they could but!!!8230; morals?

Politics is not about morals but about how most people will perceive the situation. The guiding hand of The Treasury will want to ensure people with LISAs are treated fairly which would mean either a migration path to an alternative product (for which most LISA holders would not be disadvantaged) or the extension of LISAs as a zombie product with no further contributions.

Alex