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

eskbanker

zagfles said:

eskbanker said:

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. 

Yes, the product structure undoubtedly disadvantages those who find themselves unable to find a suitable property, but my point was that in itself that doesn't justify indexation, i.e. it's not as if any promises of such increases were made or implied, so I was just challenging the apparent sense of entitlement, in the context of many other areas where inflationary increases haven't been applied.

I imagine that others will also have been making representations along the lines you argue, but again the purpose of my post wasn't to defend the product but to emphasise that the questions in the consultation mean that it could go either way, i.e. it's not a given that it'll result in improvements for those using, or thinking of using, the product.

So what other non indexation issue results in the same sort of triple whammy? Obviously there was no legal or contractual entitlement, but this issue is so obviously far more unfair than non indexation of tax thresholds etc. 

'Triple whammy' is just hysterical tabloid rhetoric though, especially when one of the three is nothing to do with the LISA as such!  Nobody's disputing that the scheme rules themselves have always disadvantaged those unable to find a property within scope, or that inflation has exacerbated and compounded that effect, but personally I don't really see lack of LISA property cap indexation as "so obviously far more unfair than non indexation of tax thresholds etc".

Anyway, does anyone actually have any reliable stats about the number of LISA holders who'd have been able to buy their first property if the cap had been indexed but who were thwarted when they realised it wasn't?

In terms of the stats that are readily available, the average (gross) value of penalised LISA withdrawals in 2023/24 was £3,022, slightly lower than the £3,099 in 2018/19 (not long after the scheme began), albeit a bit higher than the previous two years (£2,803 and £2,859), so there doesn't appear to be evidence of an especially significant long term increase in size of withdrawals by those feeling the need to pull out of LISAs, whereas average size of withdrawn qualifying pots is over 50% up on the early years, as pots are built up over time.

Ignoring interest or growth, those withdrawing that £3K (inclusive of government bonus) without qualifying are receiving £2,250 back after paying £2,400 in, which is obviously unfortunate but hardly game-changing in the context of folk with aspirations to be buying properties at over half a million quid....

https://assets.publishing.service.gov.uk/media/66ed20d8c8398625c331e80c/Lifetime_Individual_Savings_Account_Tables_2024.ods

zagfles

eskbanker said:

zagfles said:

eskbanker said:

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. 

Yes, the product structure undoubtedly disadvantages those who find themselves unable to find a suitable property, but my point was that in itself that doesn't justify indexation, i.e. it's not as if any promises of such increases were made or implied, so I was just challenging the apparent sense of entitlement, in the context of many other areas where inflationary increases haven't been applied.

I imagine that others will also have been making representations along the lines you argue, but again the purpose of my post wasn't to defend the product but to emphasise that the questions in the consultation mean that it could go either way, i.e. it's not a given that it'll result in improvements for those using, or thinking of using, the product.

So what other non indexation issue results in the same sort of triple whammy? Obviously there was no legal or contractual entitlement, but this issue is so obviously far more unfair than non indexation of tax thresholds etc. 

'Triple whammy' is just hysterical tabloid rhetoric though, especially when one of the three is nothing to do with the LISA as such!  Nobody's disputing that the scheme rules themselves have always disadvantaged those unable to find a property within scope, or that inflation has exacerbated and compounded that effect, but personally I don't really see lack of LISA property cap indexation as "so obviously far more unfair than non indexation of tax thresholds etc".

So no answer to the question then, just criticism of the phrasing. You don't see it, fine, don't see it, after all I phrased the point in a "tabloid" way so that's an easy way to simply dismiss it. Maybe I should have used a term like "a thrice of adverse consequences". But who cares. 

The real underlying issue is all of these brain dead govt schemes and subsidies which simply push house prices up and then exclude people from the subsidies based on changing and arguably unfair criteria. 

eskbanker

zagfles said:

So no answer to the question then, just criticism of the phrasing. You don't see it, fine, don't see it, after all I phrased the point in a "tabloid" way so that's an easy way to simply dismiss it. Maybe I should have used a term like "a thrice of adverse consequences". But who cares. 

The real underlying issue is all of these brain dead govt schemes and subsidies which simply push house prices up and then exclude people from the subsidies based on changing and arguably unfair criteria. 

It was a conscious decision not to get dragged into some futile zero-sum digression about something as subjective as perceptions of relative fairness across different indexation scenarios!

In terms of people being excluded by 'changing criteria', surely your objection here is that the LISA first property criteria haven't changed?

masonic

zagfles said:
The real underlying issue is all of these brain dead govt schemes and subsidies which simply push house prices up and then exclude people from the subsidies based on changing and arguably unfair criteria. 

 It's this first part we should not lose sight of. I'm sure several of us gave our feedback in the recent consultation. In my view, they need to unwind it, not double down on it.

zagfles

eskbanker said:

zagfles said:

So no answer to the question then, just criticism of the phrasing. You don't see it, fine, don't see it, after all I phrased the point in a "tabloid" way so that's an easy way to simply dismiss it. Maybe I should have used a term like "a thrice of adverse consequences". But who cares. 

The real underlying issue is all of these brain dead govt schemes and subsidies which simply push house prices up and then exclude people from the subsidies based on changing and arguably unfair criteria. 

It was a conscious decision not to get dragged into some futile zero-sum digression about something as subjective as perceptions of relative fairness across different indexation scenarios!

Well why did you reply then trying to dismiss my point by judgement of my chosen phrasing? If you don't want to argue the point, don't argue it. 

In terms of people being excluded by 'changing criteria', surely your objection here is that the LISA first property criteria haven't changed?

Oh, so you now want some futile zero-sum pedantic digression about "changing criteria". OK, changing relative to the environment the LISA was designed for. Is that better? We're through. 

eskbanker

zagfles said:

eskbanker said:

zagfles said:

So no answer to the question then, just criticism of the phrasing. You don't see it, fine, don't see it, after all I phrased the point in a "tabloid" way so that's an easy way to simply dismiss it. Maybe I should have used a term like "a thrice of adverse consequences". But who cares. 

The real underlying issue is all of these brain dead govt schemes and subsidies which simply push house prices up and then exclude people from the subsidies based on changing and arguably unfair criteria. 

It was a conscious decision not to get dragged into some futile zero-sum digression about something as subjective as perceptions of relative fairness across different indexation scenarios!

Well why did you reply then trying to dismiss my point by judgement of my chosen phrasing? If you don't want to argue the point, don't argue it.

I wasn't just commenting on your emotive choice of phrase, but the concept of lumping together three different factors when only one directly relates to the point I was making about indexation.  I did also try to move the discussion on by introducing some pertinent facts into it, but you chose not to engage with those.

zagfles said:

In terms of people being excluded by 'changing criteria', surely your objection here is that the LISA first property criteria haven't changed?

Oh, so you now want some futile zero-sum pedantic digression about "changing criteria". OK, changing relative to the environment the LISA was designed for. Is that better?

I don't know, it depends on what you're trying to say - are you suggesting that house price inflation constitutes changing the criteria of the scheme?

MeteredOut

WillPS said:

MeteredOut said:

WillPS said:

MeteredOut said:

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 a dream house. Generations of people have their first house as "good enough".

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

Exactly the same applies to "first house" though - it isn't only aspirational properties which go up in value.

I'd suggest there is not that many areas where people can't find a non-aspirational/non-dream property for under £450K, even in the South East.

I agree, it's a small geographic area right now - but it is an area nonetheless, and given house prices go up with time that area will widen. When do you suggest the £450k limit should be reviewed?

I don't think it should be reviewed. I suspect it is an (additional) driver to house price inflation, and I prefer progressive taxes/reliefs rather than those with a cliff-edges. So, I'd abolish and look to find something better to support first time buyers - which is what the progressive stamp duty rates are intended to do. 

cfw1994

MeteredOut said:

WillPS said:

MeteredOut said:

WillPS said:

MeteredOut said:

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 a dream house. Generations of people have their first house as "good enough".

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

Exactly the same applies to "first house" though - it isn't only aspirational properties which go up in value.

I'd suggest there is not that many areas where people can't find a non-aspirational/non-dream property for under £450K, even in the South East.

I agree, it's a small geographic area right now - but it is an area nonetheless, and given house prices go up with time that area will widen. When do you suggest the £450k limit should be reviewed?

I don't think it should be reviewed. I suspect it is an (additional) driver to house price inflation, and I prefer progressive taxes/reliefs rather than those with a cliff-edges. So, I'd abolish and look to find something better to support first time buyers - which is what the progressive stamp duty rates are intended to do. 

Progressive?

From 1st April 2025, there will be several changes coming into effect:

* The nil rate threshold which is currently £250,000 will return to the previous level of £125,000.

* The nil rate threshold for first-time buyers which is currently £425,000 will return to the previous level of £300,000.

* The maximum purchase price for which First-Time Buyers Relief (a reduced stamp duty rate) can be claimed is currently £625,000 and will return to the previous level of £500,000.

Sound utterly regressive for FTB to me.  
Particularly if you are living in London.

How do you see those as 'progressive'?

MeteredOut

cfw1994 said:

MeteredOut said:

WillPS said:

MeteredOut said:

WillPS said:

MeteredOut said:

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 a dream house. Generations of people have their first house as "good enough".

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

Exactly the same applies to "first house" though - it isn't only aspirational properties which go up in value.

I'd suggest there is not that many areas where people can't find a non-aspirational/non-dream property for under £450K, even in the South East.

I agree, it's a small geographic area right now - but it is an area nonetheless, and given house prices go up with time that area will widen. When do you suggest the £450k limit should be reviewed?

I don't think it should be reviewed. I suspect it is an (additional) driver to house price inflation, and I prefer progressive taxes/reliefs rather than those with a cliff-edges. So, I'd abolish and look to find something better to support first time buyers - which is what the progressive stamp duty rates are intended to do. 

Progressive?

From 1st April 2025, there will be several changes coming into effect:

* The nil rate threshold which is currently £250,000 will return to the previous level of £125,000.

* The nil rate threshold for first-time buyers which is currently £425,000 will return to the previous level of £300,000.

* The maximum purchase price for which First-Time Buyers Relief (a reduced stamp duty rate) can be claimed is currently £625,000 and will return to the previous level of £500,000.

Sound utterly regressive for FTB to me.  
Particularly if you are living in London.

How do you see those as 'progressive'?

Progressive as in the % fee increases as the purchase price goes up, so those that can afford more expensive houses pay more tax. Someone who can afford their first house for £500K+ does not need government support.

cfw1994

We will have to disagree.  
That's fine.
You're focussing on the pricey end of London properties.   Not forcing FTBs to pay much more stamp duty.