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We want to hear about your Lifetime ISA (LISA) experiences
Comments
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Turn 40 towards end of June.
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STARTED saving in a LISA approx, 6+ years ago, and STOPPED paying into it about 2 years ago!
I am one of the many people caught in the LISA property value "trap", as I leave near London. So did not foresee house prices rocketing the way they have, and the government simultaneously refusing to increase the property purchase limit above £450K.
We are unlikely to be able to buy a family home under this price, and so will be losing my interest AND a chunk of my hard earned/saved money!
I understand Martin Lewis is fighting for the government to allow people to withdraw for higher property purchases without losing their own money, and only losing the interest. And that of course would be a great start. But am I the only one feeling hard done by for even losing the interest?!?
Interest rates in LISA's are generally below other savings interest rates, and so the ONLY benefit of putting your money there was the bonus. The interest my money COULD HAVE earned elsewhere, just makes me want to cry!
Without regular updated reviews of the LISA, it is not fit for purpose. And hard working savers should not be held financially responsible for that!
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Without regular updated reviews of the LISA, it is not fit for purpose
As mentioned on the previous page, the government plans to introduce a new scheme for first time buyers, which would effectively replace the LISA for them, so a review is planned, although it all seems to have gone quiet since it was announced in the autumn 2025 budget that consultation would happen in early 2026…
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@NurseMoneySaver1122 In regards to interest, you can still transfer any existing LISA into one paying a higher interest rate. Mightn't help you in the long term but at least in the meantime the funds in your LISA could be earning around 4% interest tax-free.
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My daughter has just got home from work in tears as she has just seen in black and white how much of her hard earned cash will be TAKEN by HMRC when she uses her 5 LISAs to purchase her first house.
As the purchase price is £460,000, she accepted that to get this house that was "the one" she would lose the bonus and lose the interest but it felt like a kick in the teeth when she saw today that she would lose a chunk of her own money, surely that just being greedy.
Unfortunately, and like a lot of people, we live in an area where house prices are higher than average and have been on the up since she started saving in her LISA 5 years ago.
I think it is shameful that the people in Government think it is acceptable to deduct money from first time buyers savings when Government have not even bothered to review periodically whether the LISA product is keeping up with house prices. It feels like this LISA product is not fit for purpose and where people are legitimately using it to purchase their first property they should not have any of their own savings capital taken away from them. It's a hard enough pill to swallow knowing you will be losing the interest, without having some of your own cash taken away from you.
As a reasonably money-savvy parent, I advised my daughter to originally open a Help to Buy ISA when they first came out, but when it became apparent that the £250,000 purchase price limit was not enough for this area I advised she moved the money from her Help to Buy to a Life Time ISA. I now wish I had not given her this advise and feel responsible for her losing thousands of hard earned cash.I have another daughter with a LISA, saving to buy her own house and I am now wondering whether she would be better withdrawing her money now as she may end up in the same position when she needs to use it.
Sadly it seem that it is the honest, hard working people trying to do the right thing who end up paying the price.
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As posted further up the page, the government has accepted the need to come up with something better and the consultation process about the replacement product (unlikely to entail similar withdrawal penalties for non-qualifying purchases) ought to have started by now, although this is obviously little or no consolation to those caught by the less appealing aspects of the existing product though.
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I understand the need to completely overhaul the LISA and come up with a new product, but in the meantime, why not increase the price limit so that people aren't caught out? Just a rough calculation in line with average house price rises would suffice.
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Lack of indexation has been an issue since the product was launched but obviously affects more people as prices continue to rise, and the government will presumably consider that announcing a replacement product with a gestation period of two to three years effectively kicks the can down the road, and that they can simply point to this rather than feeling the need to make any tweaks to the existing product in the mean time…
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"As the purchase price is £460,000, she accepted that to get this house that was "the one" she would lose the bonus and lose the interest but it felt like a kick in the teeth when she saw today that she would lose a chunk of her own money, surely that just being greedy."
The 25% penalty effectively claws back the bonus and then imposes a further 6.25% loss, which would normally be covered by interest if the LISA has been open for a number of years.
It is a shame that the reduced 20% penalty used during Covid times could not have been reinstated for this scenario.
"I have another daughter with a LISA, saving to buy her own house and I am now wondering whether she would be better withdrawing her money now as she may end up in the same position when she needs to use it."
Given that there is supposed to be a route to transfer into the new homebuyer-specific product when it becomes available, assuming your other daughter won't be buying for a few years, there is no benefit to withdrawing early, but it may be worth delaying this tax year's contributions until more is known.
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Given that there is supposed to be a route to transfer into the new homebuyer-specific product when it becomes available…
The consultation launched today suggests not, and the two products will continue in tandem, with buyers able to use both towards their property purchase:
4.1 Individuals with funds in a Lifetime ISA (LISA) have already received a government bonus and will not be able to transfer their LISA to the new FTB product. This prevents them from receiving a further bonus.
4.2 To ensure that current holders of the LISA do not lose out, LISA holders will be able to use any funds in their existing LISA and those in the new FTB ISA for the same purchase.New thread started to discuss the new product, since there's now some flesh on the bones:
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