MSE News: Martin Lewis: Is a Lifetime ISA win coming in the Budget?

MSE_Helen_K

In a blow to first-time buyers – and to MoneySavingExpert.com and its founder Martin Lewis's campaign – there were no changes to the rules on Lifetime ISAs (LISAs) announced in today's Spring Budget. However, while the news is "disappointing", Martin says a shake-up "isn't off the table". 

Read the full story:
'Spring Budget 2024: No change to Lifetime ISAs in blow to Martin and MSE's campaign – but a shake-up could still be on the table'

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cfw1994

What are the chances of our current chancellor realising that the LISA system should always have been linked to inflation, & changing it accordingly?
Property (& wages) in London are such that it would be very easy for a young couple to be looking at places over the £450K limit.   It is crazy that their LISA savings can no longer be used to buy their first home.

Is Martin Lewis still looking at persuading the Government to get sensible on this, or is it such a backburner project with all their other work that it is firmly off the table?

eskbanker

The Treasury select committee kicked off a review last month:

https://forums.moneysavingexpert.com/discussion/6580115/lifetime-isa-parliamentary-consultation-have-your-say

MeteredOut

cfw1994 said:

What are the chances of our current chancellor realising that the LISA system should always have been linked to inflation, & changing it accordingly?
Property (& wages) in London are such that it would be very easy for a young couple to be looking at places over the £450K limit.   It is crazy that their LISA savings can no longer be used to buy their first home.

Is Martin Lewis still looking at persuading the Government to get sensible on this, or is it such a backburner project with all their other work that it is firmly off the table?

The counter argument is that a young couple that can afford a £450K house do not need tax breaks to enable that purchase. I do agree they should be able to withdraw penalty free at any time however.

cfw1994

MeteredOut said:

cfw1994 said:

What are the chances of our current chancellor realising that the LISA system should always have been linked to inflation, & changing it accordingly?
Property (& wages) in London are such that it would be very easy for a young couple to be looking at places over the £450K limit.   It is crazy that their LISA savings can no longer be used to buy their first home.

Is Martin Lewis still looking at persuading the Government to get sensible on this, or is it such a backburner project with all their other work that it is firmly off the table?

The counter argument is that a young couple that can afford a £450K house do not need tax breaks to enable that purchase. I do agree they should be able to withdraw penalty free at any time however.

That makes sense for places outside London.....although living in London is hellish expensive - refusing to allow the LISA for FTB is just wrong.

The original value of 450k would now be something like 565K if it took into account inflation.  Why should that not be the value for use of a LISA?

eskbanker

cfw1994 said:

The original value of 450k would now be something like 565K if it took into account inflation.  Why should that not be the value for use of a LISA?

There's no automatic right to have values adjusted by inflation - it's not some sort of default position!  There are countless examples of figures that haven't been increased, ranging from the pensioners' Christmas bonus that's been £10 since 1972, through frozen thresholds for income tax and IHT, and ISA annual contribution limits, to the property value caps in LISA's precursor, Help To Buy ISA.

No doubt plenty of respondents to the above consultation process will have argued for indexation, but note that there are also questions like "Should the Lifetime ISA be abolished?" and "Given its policy purposes, is the Lifetime ISA value for money for the Government?" so it's not a one-way street where it's all about making the scheme more consumer-friendly....

zagfles

eskbanker said:

cfw1994 said:

The original value of 450k would now be something like 565K if it took into account inflation.  Why should that not be the value for use of a LISA?

There's no automatic right to have values adjusted by inflation - it's not some sort of default position!  There are countless examples of figures that haven't been increased, ranging from the pensioners' Christmas bonus that's been £10 since 1972, through frozen thresholds for income tax and IHT, and ISA annual contribution limits, to the property value caps in LISA's precursor, Help To Buy ISA.

No doubt plenty of respondents to the above consultation process will have argued for indexation, but note that there are also questions like "Should the Lifetime ISA be abolished?" and "Given its policy purposes, is the Lifetime ISA value for money for the Government?" so it's not a one-way street where it's all about making the scheme more consumer-friendly....

So the govt sets up a scheme where you can save over several years to buy your dream house and get a bonus towards its purchase. So young people save in such a scheme. No brainer, right? 

But over those several years while they're diligently saving, the price of that dream house has risen to above the limit you're allowed to use the LISA for. So not only do they now have to pay far more for the house, not only do they lose the bonus they thought they'd get, but they also have to pay a penalty to get access to their own saved money! A triple whammy. 

It's an unbelievably ridiculous and unjust situation. Virtually all govt interference in the housing market that's supposed to help people simply pushes prices up, so doesn't actually help anyone wanting to buy. From LISA/HTB ISA's affordable housing schemes eg where builders need to set aside a certain proportion as "affordable", which means the rest are less affordable, shared equity schemes, social housing schemes etc. All just cause prices to rise. 

cfw1994

Well put, @zagfles👍

boingy

It's only recently that I learned there is a penalty for cashing in a LISA. It's fair enough to claw back the bonus that was added but it's nuts to add a penalty on top of that. 

MeteredOut

zagfles said:

eskbanker said:

cfw1994 said:

The original value of 450k would now be something like 565K if it took into account inflation.  Why should that not be the value for use of a LISA?

There's no automatic right to have values adjusted by inflation - it's not some sort of default position!  There are countless examples of figures that haven't been increased, ranging from the pensioners' Christmas bonus that's been £10 since 1972, through frozen thresholds for income tax and IHT, and ISA annual contribution limits, to the property value caps in LISA's precursor, Help To Buy ISA.

No doubt plenty of respondents to the above consultation process will have argued for indexation, but note that there are also questions like "Should the Lifetime ISA be abolished?" and "Given its policy purposes, is the Lifetime ISA value for money for the Government?" so it's not a one-way street where it's all about making the scheme more consumer-friendly....

So the govt sets up a scheme where you can save over several years to buy your dream house and get a bonus towards its purchase. So young people save in such a scheme. No brainer, right? 

But over those several years while they're diligently saving, the price of that dream house has risen to above the limit you're allowed to use the LISA for. So not only do they now have to pay far more for the house, not only do they lose the bonus they thought they'd get, but they also have to pay a penalty to get access to their own saved money! A triple whammy. 

It's an unbelievably ridiculous and unjust situation. Virtually all govt interference in the housing market that's supposed to help people simply pushes prices up, so doesn't actually help anyone wanting to buy. From LISA/HTB ISA's affordable housing schemes eg where builders need to set aside a certain proportion as "affordable", which means the rest are less affordable, shared equity schemes, social housing schemes etc. All just cause prices to rise. 

The scheme was put in place to help first time buyers to buy a house, not so that they could afford dream house. Generations of people have accepted their first house has to be "good enough" and I can guarantee that the vast majority people trying to find a house could find one that can work for them for under £450K, even in the South East. It might not be exactly where they want it, but that's the compromise everyone else has to make.

You're right that scheme such as this just help the upwards pressure on prices, so perhaps it should just be abolished?