Lifetime Individual Savings Account

Summary

Our inquiry evaluated whether the Lifetime Individual Savings Account (LISA) is still an appropriate financial product eight years after its launch. We found:

• the dual-purpose design makes the Lifetime ISA complex and increases the risk of consumers choosing unsuitable investment strategies;
• there is confusion around the withdrawal charge and Lifetime ISA holders risk losing a significant part of their savings due to withdrawals to cover unforeseen circumstances, as a result of the withdrawal penalty arrangements;
• the Lifetime ISA may divert people from saving in more efficient pensions;
• cash Lifetime ISAs may not be the best way to save for retirement, but stocks and shares Lifetime ISAs can be a useful complementary retirement saving vehicle for some people including the self-employed;
• retirement savings in Lifetime ISAs are included within the Universal Credit eligibility assessment, which is inconsistent with all other pension savings; and
• the house price cap ensures that Government spending supports those who need financial assistance the most.

We endorse the Government ambition to support first-time buyers and encourage long-term retirement savings. However, the Lifetime ISA may not be the most efficient use of taxpayers’ money to achieve those disparate objectives. Given the scale of demand on public finances, the Treasury must carefully consider whether significant spending on the Lifetime ISA is the best way of achieving policy objectives.

1 Introduction

Background

1. On 16 March 2016, the then Chancellor of the Exchequer The Rt Hon George Osborne announced a new “Lifetime Individual Savings Account” (LISA). The product had two objectives:

• to help people save for a first home; and
• to help people save for retirement.¹

2. The LISA was launched in April 2017. Since then, eligible individuals have been able to open a LISA and to save up to £4,000 in the account each tax year. The Government provides a 25% bonus on such contributions per tax year. That means that people who save the maximum each year receive an annual £1,000 bonus from the Government. Savers can make LISA contributions and receive a bonus from the age of 18 up to the age of 50, but they must have opened their LISA before they turn 40.

3. The full balance within the account, including the Government bonus, can be withdrawn in the following circumstances without incurring a Government-imposed withdrawal charge:

• to buy a first home worth up to £450,000 at any time from 12 months after opening the account;
• when the saver reaches 60 years of age; or
• if the saver is terminally ill, with less than 12 months to live.

If an individual withdraws their savings from their LISA for any other reason (an unauthorised withdrawal) they must pay a withdrawal charge of 25%. That charge recovers the Government bonus, accrued interest and some of the saver’s contribution.

Inquiry

4. We initiated our inquiry on 7 January 2025 to evaluate whether the LISA remained an appropriate financial product eight years after launch and whether the product delivered value for money for the taxpayer.² We received 200 written submissions. We also conducted two oral evidence sessions, where we heard from commentators, LISA providers and the Economic Secretary to the Treasury. We are grateful to everyone who took the time to engage with our inquiry.

Take up of the Lifetime ISA

Lifetime ISA take up by providers

5. Only 33 (one in seven) of all ISA providers have chosen to provide the LISA.³ Feedback received by The Investing and Saving Alliance, a financial services organisation, suggested that the LISA “was simply too complex” for ISA managers to choose to enter the market.⁴ Debbie Crosbie, Chief Executive of Nationwide agreed, saying that the building society “felt that the complexity of that product was not right for our proposition.”⁵ Moneybox also noted complexity as the primary reason so few high street banks offer the LISA, although it added that the LISA’s operational complexity “is easily navigable for modern fintechs”, suggesting that newer market providers may be better placed than banks to provide the product.⁶

6. Martin Lewis, Founder and Executive Chair of MoneySavingExpert, told us that high street banks had decided not to offer the LISA because “they think they are going to be done for mis-selling.”⁷ West Bromwich Building Society explained that it would be more inclined to offer the LISA “if the product were structured more fairly for customers, with fewer restrictions and improved value.”⁸ Ian Stuart, HSBC, CEO, told us that HSBC has “better products that give a better return”. He explained that “should you break the ISA, the break clauses can be quite heavy, so we always get nervous about that—how do you explain that to the customer?”⁹ Charlie Nunn, Executive Director and Group Chief Executive at Lloyds Banking Group added that the LISA is a

[…] relatively complex product for the people it is targeting, […] with a very punitive 25% out […] so we are very concerned about it from a complexity and a conduct perspective […] How do you help people safely to make that choice? We have very high obligations on us, as you know—you rightly challenge us—so we are nervous about the design of the product as it stands, and we think there are better alternatives.¹⁰

Number of Lifetime ISA accounts

7. At the end of tax year 2023–24, 1,338,000 LISA accounts were open.¹¹ HM Revenue and Customs (HMRC) stated that “Around 6% of the population who have ever been eligible for a LISA (adults aged 18–46) have held one (as of January 2024)”.¹² HMRC provided us with the data in Figure 1 on the numbers of LISA accounts that were open, opened and closed in each tax year. The figures are rounded to the nearest 1,000:

Figure 1: Number of LISA accounts open by tax year and number of accounts opened and closed in each tax year

*According to HMRC, the figures for the tax years 2017 to 2018 and 2018 to 2019 are unreliable due to data issues and adjustments made to the scheme in its first year. The figures are likely to be underestimates.

Source: Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025, Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025. Note that the figures for number of LISA accounts open differ between both letters and the latest figures received have been used.

8. The Building Societies Association, a trade body that represents building societies, and the Investing and Saving Alliance noted that there was a lack of awareness of the LISA in the target market.¹³ Research carried out by OneFamily, a mutual financial services provider, found that 70% of around 1,800 survey respondents without a LISA would consider opening one after learning about the product. Among those already aware of the LISA, many chose not to open one citing the need for accessible savings in case of emergency, a concern most commonly expressed by 31 to 40-year-olds.¹⁴

9. Survey results from Leeds Building Society, which does not offer the LISA, suggested that the LISA’s complex rules discourage customers. Out of 4,000 adults:

• 63% had heard of the Lifetime ISA but almost half (48%) of those respondents did not have one;
• 27% said they had avoided the LISA because they did not understand how it works; and
• only 12% were currently saving for a deposit are using a Lifetime ISA.¹⁵

Demographic profile of Lifetime ISA users

10. Some providers shared insights into the demographic profile of their LISA customers, which suggested they were younger and earned lower incomes than customers buying homes without this product. Tembo Money said that its LISA customers were four years younger than those buying without a LISA, had 40% lower household income (£41,330 average) and homes below average pricing.¹⁶ Brian Byrnes from Moneybox told us that 80% of Moneybox LISA customers earned £40,000 or less.¹⁷

Early criticisms

11. A Report published by the then Treasury Committee in 2018, Household finances: income, saving and debt, criticised the LISA for “its complexity, its perverse incentives, its lack of complementarity with the pensions saving landscape and its apparent lack of popularity with the industry and pension savers” and recommended abolition.¹⁸

12. At the time of the LISA’s launch, the Financial Conduct Authority (FCA) pointed out that the LISA posed several risks to the FCA’s objectives, particularly the consumer protection objective given the product’s complexity (see also Consumer Duty in Chapter 1).¹⁹ It noted that savers might lose out by saving in a LISA rather than a pension, because they might forfeit employer contributions. In addition, higher and additional rate taxpayers would forgo tax relief greater than the bonus received.²⁰ The FCA amended its rules to ensure retail clients receive enhanced disclosure requirements and warnings on the withdrawal charge.²¹

HMRC research on the Lifetime ISA

13. Limited research has been carried out into how users perceive and use the LISA.²² To address this, HMRC commissioned qualitative and quantitative research on the product. The aim of the former was to “provide a deeper understanding of the perceptions, experiences, and attitudes towards the LISA”.²³ The objectives of the latter include establishing a demographic and savings profile of LISA holders and non-holders and assessing user experience, including exploring levels of awareness of the LISA and reasons why non-holders have not opened a LISA.²⁴ The findings of the qualitative research have been published and the quantitative research will be published later this year.

2 Design Challenges

14. Apart from a temporary reduction in the withdrawal charge during the COVID-19 pandemic, the LISA has remained unchanged since it was launched in 2017.²⁵ We heard criticisms of both the LISA’s dual purpose and the withdrawal charge.

Dual purpose

15. The purpose of the LISA is to support young people saving for a first home and/or saving for retirement. Several witnesses told us that the dual purpose created unnecessary complexity. Quilter, a financial planning business, stated that “[…] our experience with clients is that the Lifetime ISA’s dual-purpose design leaves many consumers confused about its intended use, which weakens its overall effectiveness.”²⁶ Similarly, Baroness Ros Altmann, a former Pensions Minister, observed that “[C]onfusing house purchase with retirement provision is not necessarily sensible and the two should be considered separate social aims.”²⁷ The Pensions and Lifetime Savings Association, a trade association, warned that “there is a risk that savers perceive from its design that it is appropriate to save for a property prior to saving for retirement, as opposed to saving for both concurrently.”²⁸

16. Some LISA providers explained that people mainly use the LISA to buy a home and most do not plan to transition to retirement saving with their LISA, suggesting that individuals are splitting the product themselves in practice. The Independent Order of Oddfellows Manchester Unity Friendly Society, a LISA provider, said that the “majority of customers do not engage any further with their LISA once the property has been purchased.”²⁹ The Metropolitan Police Friendly Society, another LISA provider, stated that “72% of our Lifetime ISA applicants have applied looking to purchase their first property, 12% are saving towards 60 and 16% have chosen both.”³⁰ Similarly, Skipton Building Society, a cash LISA provider, stated that “70% of Skipton LISA customers state they are using it to save for their first home, 17% say that they are using [the LISA] for their first home and retirement and only 12% say that they are using it solely for retirement.”³¹ Skipton Building Society also stated that it has seen “around 50% of customers retain their Lifetime ISA accounts following house purchase but only a limited number (<5%) have subsequently deposited in their account”.³²

17. Data provided by Moneybox to the Committee showed that only 8% of its customers who had already bought a home with their Moneybox LISA made a further contribution in the 2019–20 tax year, and this figure was lower in later years.³³ Moneybox stated:

Despite the seemingly low number of users who have contributed to a LISA after purchasing a home, 79% of those asked in a Moneybox survey said that they either plan to return or are considering returning to the Lifetime ISA in the future to supplement their retirement savings.³⁴

18. Foresters Financial, also a LISA provider, claimed that the transition from saving to purchase property to saving for retirement happens frequently among its client base:

Since May 2019, almost 2,000 withdrawals for house purchase have been made from Foresters LISA. 52% of these have been partial withdrawals, showing there is a significant propensity for customers to keep their LISA open after using it for house purchase, and one third of these remaining plans are currently paying into the plan.³⁵

The dual purpose and investment approaches

19. Several witnesses emphasised the need for different investment strategies when saving for the contrasting goals of buying a home and for retirement.³⁶ We heard that investing for the short, medium and long term in a single product can increase risk for consumers. Martin Lewis told us that the “right thing to do when you are saving as a first-time buyer is to put it in cash. The right thing to do if you are saving for your retirement is to have it in equities”.³⁷ Richard Stone, Chief Executive of the Association of Investment Companies agreed:

If you are wanting to save for a house purchase, that is a short-term objective. You should be in cash. You do not want to risk the capital value of your deposit. If you are saving for retirement, it is a long-term savings objective. You should be exposed to higher-risk, higher-return investments in that process.³⁸

20. The design of the LISA may exacerbate the risk of poor asset allocation by a consumer. The Pensions Policy Institute, a research organisation, found that early access to savings within a retirement vehicle, a feature of the LISA, is associated with lower-risk investment approaches, such as cash.³⁹ The FCA concluded as part of its consultation paper on implementing the LISA in 2016 that “[i]nvestors may remain invested in an inappropriate asset mix” when saving for retirement following a home purchase.⁴⁰

21. A number of respondents highlighted concerns with consumers using cash LISAs to save for the long term. Funmi Olufunwa, a Finance Expert and Founder of Hoops Finance, said she was “concerned” about people saving in cash as a retirement savings product.⁴¹ The Office for Tax Simplification (OTS) explained:

Major financial institutions have told the OTS that they have decided it would be inappropriate to offer cash LISAs to unadvised retail investors, who may not be able to form an assessment of best value at the time of investment and will be penalised if they change their mind at a later stage.⁴²

Moneybox, which offers both cash and stocks and shares LISAs, reported that 80% of contributions to LISAs following a home purchase were to cash LISAs.⁴³ That suggests a significant proportion of retirement savers are relying on cash rather than higher risk and higher return investments. This raises a concern that people may not be optimising their retirement savings, which could leave them with a smaller pot in the future.

22. When we requested data on the proportion of cash and stocks and shares LISAs from HMRC, we were told that HMRC was unable to provide this data.⁴⁴ Laura Webster, Director of Personal Tax, Welfare and Pensions at HM Treasury, confirmed that the quantitative HMRC research will “give higher-level findings on what proportion of people are in stocks and shares versus cash at four different profiles.”⁴⁵

23. We asked Emma Reynolds MP, Economic Secretary to the Treasury, whether she was considering addressing the dual-purpose design of the product. She argued that there were benefits in the current design:

[…] it is very flexible. You may have a situation where somebody is using it to purchase a home and that does not work out. They could use it for a pension later in life. There are pros and cons of having a dual-purpose ISA.

It is something we are looking at. As part of the second study, HMRC is looking at how the transition works, whether it works for people, whether people use it and what people are subscribing for. Mostly, people are subscribing for a specific purpose, but some people might be openminded about how they are going to use it.⁴⁶

Withdrawal charge

26. The withdrawal charge of 25% is applied to unauthorised withdrawals, causing LISA holders to lose the Government bonuses that they have received, plus 6.25% of their own contributions. Several witnesses described that loss of 6.25% as a “withdrawal penalty”.⁴⁷

Incentive to save

27. The Independent Order of Oddfellows Manchester Unity Friendly Society, a LISA provider, explained that the withdrawal charge was applied “to ensure that LISAs are used for their intended purposes and to ‘dis-incentivise’ customers from dipping into their savings.”⁴⁸ Hargreaves Lansdown, also a LISA provider, said that the LISA “builds a savings and investment culture, encouraging people to think of the long term as well as more immediate needs.”⁴⁹ Emma Reynolds MP, Economic Secretary to the Treasury, told us that the withdrawal charge “is a strong incentive not to withdraw”.⁵⁰

Unauthorised withdrawals

28. HM Treasury has collected approximately £213 million in withdrawal charges from approximately 286,000 individuals due to unauthorised withdrawals over the six tax years to 2023–24.⁵¹ In the 2023–24 financial year alone, £75 million was paid in withdrawal charges, a 39% increase on the previous year. The average value of an unauthorised withdrawal was approximately £3,000.⁵² In 2023–24, 99,650 people made unauthorised withdrawals while only 56,900 people used their LISA to buy a home. The proportion of individuals making unauthorised withdrawals has increased from 45% in 2018–19 to 64% in 2023–24.⁵³ The number of individuals paying the withdrawal charge as a percentage of total LISA holders increased from 5% in 2021–22 to 7% in 2023–24.⁵⁴

Figure 2: Number of individuals making unauthorised withdrawals and withdrawals for a home purchase

Source: HM Revenue and Customs, Lifetime Individual Savings Account Tables 2024, gov.uk, (accessed 20 June 2025), Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025.

29. HMRC provided data on the number of individuals who paid the withdrawal charge in 2022–23, broken down by size of the charge. Figure 3 shows that 80% of them paid a charge of less than £999.⁵⁵

Figure 3: Number of individuals incurring withdrawal charges due to unauthorised withdrawals in the tax year 2022 to 2023, by size of charge

Source: Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025

30. Hargreaves Lansdown and Skipton Building Society shared the number of their LISA customers who had made multiple unauthorised withdrawals, across all available tax years. Around one-third of Hargreaves Lansdown LISA customers who made an unauthorised withdrawal did so multiple times, compared with 15% at Skipton Building Society.

Figure 4: Number of LISA holders who have made one or multiple unauthorised withdrawals, across all tax years

Source: Letter from Hargreaves Lansdown to the Chair regarding Lifetime ISA data request, 8 April 2025, Hargreaves Lansdown (LISA0208), Letter from Skipton Building Society to the Chair regarding Lifetime ISA data request, 14 April 2025.

31. We asked HMRC how many individuals made multiple unauthorised withdrawals, but HMRC was unable to provide that data.⁵⁶

32. When we discussed the withdrawal charge with Laura Webster, Director of Personal Tax, Welfare and Pensions at HM Treasury, she argued that the proportion of those paying the charge was “significant but a minority”, with about 7% of holders making an unauthorised withdrawal in the last year for which data was available.⁵⁷

Consumer Duty

34. Concerns about the design of the LISA and the withdrawal charge have meant that some ISA providers have chosen not to offer it. The FCA’s Consumer Duty sets the standard of care that firms should give to consumers in retail financial markets to deliver good consumer outcomes.⁵⁸ Many respondents argued that confusion around the withdrawal charge undermined the Consumer Duty’s goal of ensuring consumer understanding.⁵⁹ The Association of British Insurers, a trade body, explained:

When considering it through the FCA’s four Consumer Duty outcomes, one could argue that the penalty reduces consumer understanding of the product (as it adds complexity), it represents poor value where a customer exits for reasons other than house purchase or retirement (e.g. financial hardship), and it reduces the likelihood of the product being fit for purpose (e.g. consumers may feel ‘locked in’ to a long-term savings vehicle if house purchase plans fall through).⁶⁰

35. Emma Reynolds MP, the Economic Secretary to the Treasury, told us that the LISA “is a voluntary savings product. People go into it with their eyes wide open”.⁶¹ However, others expressed a concern about consumer understanding of the LISA’s rules. Foresters Financial, a LISA provider, told us that consumer misunderstanding is problematic in practice, especially around the withdrawal charge across both LISA holders and non-holders. It concluded that “the withdrawal penalty was an area with potential to cause confusion or misunderstanding. This is backed up by complaints – 4 out of 5 product-specific complaints we received in 2024 related to the withdrawal penalty, or customer understanding of this.”⁶² The Building Societies Association explained that the withdrawal penalty “shows a major disconnect between the LISA scheme and its beneficiaries”, and “is also one of the main reasons that prevents many of our members from offering the LISA.”⁶³

36. We asked Emma Reynolds MP, Economic Secretary to the Treasury, whether the withdrawal charge was a significant problem. She acknowledged that there was confusion and stressed the responsibility of the LISA provider to provide clear information to LISA users:

There is some confusion about the withdrawal penalty. There is a 25% bonus, but when you withdraw you do not just lose the bonus; you lose 25% of the whole. I can see how that could be confusing to people. It is the provider’s responsibility, rather than the Government’s responsibility, to make that clear.⁶⁴

[…]

Ultimately, the providers are responsible for ensuring that they are providing the right information to their consumers. They have a broader obligation now under the consumer duty to ensure that the consumer gets the best outcome.⁶⁵

Changes in circumstances

37. Multiple witnesses highlighted the challenge that individuals face in anticipating future changes in their circumstances that might force them to make unauthorised withdrawals and to incur withdrawal charges. Such changes include buying a first home with a value greater than the price cap with a new partner or family member, or changes in personal finances such as earning a higher salary or experiencing financial distress.⁶⁶

38. LISA holders who participated in the qualitative research survey commissioned by HMRC cited “unforeseen changes in their circumstances” as a reason for withdrawing their money, and felt the charge was “further penalising them for their misfortune.”⁶⁷ The Quoted Companies Alliance, a trading association, argued that the LISA is “rigid and punitive for those facing financial hardship or changing circumstances.”⁶⁸ MoneySavingExpert noted that “LISA pension savings are also not protected if you go bankrupt (unlike most other pension funds before they become accessible), meaning you could be forced to cash in early, incurring a 6.25% penalty”.⁶⁹

39. LISA providers explained that customers are withdrawing their savings to buy a home valued above the price cap or in emergencies. AJ Bell explained that “people are not ‘gaming the system’ by making maximum payments in for a few years to merely withdraw them later. Instead, people often start saving or investing with the best of intentions but may be forced to stop or withdraw because of life events. Evidence suggests that those accessing their Lifetime ISA outside the parameters of authorised withdrawal are by-and-large doing so because they are in financial distress”.⁷⁰ Foresters Financial, a LISA provider, said that “we are seeing about 30% of withdrawals from our LISA base attracting a penalty. These are often necessary withdrawals, given the uncertainty of customer’s economic situation, or because the product does not meet the needs that it sets out to address (e.g. property value is ineligible for LISA usage)”.⁷¹

Temporary reduction in the withdrawal charge

40. The withdrawal charge was temporarily reduced to 20% during the pandemic. Moneybox said that the lower charge “did not lead to widespread misuse, but rather allowed savers to access funds when needed without significantly eroding the product’s goals”.⁷² Moneybox observed consumer behaviour during the reduction:

Moneybox data shows that, during the pandemic, there was only a modest increase in the number of LISA withdrawals, from 0.7% to 1.2% of total LISA users, and the average withdrawal amount increased from ~£1,200 to ~£1,700. It is worth remembering that increased emergency access to savings is to be expected during a pandemic, and it would be reasonable to expect a smaller increase in non-pandemic times.⁷³

Calls to reform the withdrawal charge

41. Several witnesses called for reforms to the LISA to make it easier for savers to withdraw savings from their LISA, penalty free. The majority of organisations were also in favour of a reduction in the charge to 20%, meaning that the LISA holder would only lose the Government bonus and would retain their own contribution when making an unauthorised withdrawal.⁷⁴ Skipton Building Society said that such a reduction in the charge would ensure that “LISA savers are not losing capital as a result of their personal circumstances changing”.⁷⁵

42. Some respondents drew out the unfairness of the withdrawal charge particularly for those using their LISA savings to buy a home that exceeded the house price cap, resulting in a penalty on their own savings.⁷⁶ Martin Lewis has campaigned for a reduction in the withdrawal charge to 20%. He told us:

I have no problem with the withdrawal penalty in its own right. I have a problem with it for first-time buyers buying a house. We have a succession of young people who are saving in the vehicle they have been encouraged to save in by the state, who are then trying to use their savings to buy a first-time property, but due to house price inflation their property has just tripped above the £450,000 level. Then not only do they not get the £1,000 a year bonus they were intended to get, which I understand is legitimate as a threshold, but they are fined by the state effectively 6.25% of their own money in order to withdraw that money to get the cash out.⁷⁷

43. AJ Bell also argued that the withdrawal charge in its current form might undermine confidence among new investors:

Paying into a Lifetime ISA is often a younger person’s first jump into investing which they have initiated (rather than been set up by others – employers or parents), and by keeping this penalty, and the complex rules for when it applies, we risk disenfranchising a generation.⁷⁸

44. We heard that the withdrawal charge may disproportionately affect those with lower incomes and limited financial resilience, as they may be especially deterred by the penalty. Martin Lewis told us:

As with all things, the more financially educated you are, the more you tend to engage in products. The less financially educated you are, the less you tend to engage in products. When there is an off-putting thing like a penalty, that will disproportionately go to those who are less financially educated, who tend to be those from lower income backgrounds.⁷⁹

However, the Association of British Insurers warned that a reduction in the charge would need to be “balanced against the risk of consumers opening a LISA with no intention to use it for buying a house or retirement and recycling the returns on the Government top-up.”⁸⁰

45. When asked whether a reduction in the withdrawal charge would significantly impact the public finances, Emma Reynolds MP, Economic Secretary to the Treasury, said that it would:

We cannot have a risk-free option where you are investing for the long term, but there is no charge if you take it out. We could not have that situation. There has to be some penalty or withdrawal charge in a product such as this.⁸¹

[…]

We cannot have a product that gives you 25% when there is no penalty for withdrawing from it if you are not complying with the intended purpose. Otherwise, we would get so many people into the product who were not using it for its intended purpose.⁸²

[…]

There could be a case for changing the withdrawal charge, but you would have to find money from elsewhere in order to do that.⁸³

3 Saving for a home with the Lifetime ISA

47. Building on the potential issues with the design of the LISA discussed in the previous chapter, we also heard specific concerns around the effectiveness of the LISA to support homeownership.

48. Homeownership rates among young people have decreased since 2000. Some 39% of 25 to 34-year-olds owned their home in 2022, whereas 59% did in 2000.⁸⁴ The Skipton Group Affordability Index found that only “1 in 8 potential first-time buyers in the UK can afford the average first-time buyer property in their area”⁸⁵ and in Q4 2024 “only 11.5% of potential first-time buyers could afford to get on to the property ladder based on their own financial situation”.⁸⁶

Home purchases

49. Since 2018–19, 228,000 people have used LISAs to buy 182,500 homes, which equates to an average of 38,000 homes purchased each year.⁸⁷ The average first-time buyer deposit is around £55,000 according to the English Housing Survey and the average withdrawal from LISAs to buy a home in tax year 2023–24 was £15,000, suggesting that buyers typically save additional funds beyond their LISA contributions.⁸⁸ The Pensions and Lifetime Savings Association observed that “Research suggests that around one in six first-time buyers in the past year used a LISA when purchasing their first home.”⁸⁹ Moneybox stated that “only 31% [of Moneybox LISA holders] maxed out contributions in 2024” and the “average withdrawal for a house purchase was £14,927”.⁹⁰ OneFamily’s internal data shows that the average value withdrawn for a house purchase was £13,500.⁹¹

50. HMRC regional data on home purchases using the LISA showed that the region with the most homes bought with LISA savings has consistently been the South East, representing 16% of all purchases in tax year 2023–24.⁹²

Figure 5: Regional breakdown of all individuals buying homes with LISAs per tax year

Source: Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025

51. Some LISA providers provided insight into the prices of homes their customers have bought using their LISA savings. Skipton Building Society said “Almost half (46%) [of customers who have used their LISA to buy a home] have purchased a property under £200,000, and over three-quarters (79%) have bought a home under £300,000”.⁹³

52. Moneybox provided the Committee with data on the price distribution of homes bought using its LISAs for each tax year. Figure 6 shows that 63% of these homes fell within the £200,000 and £399,999 range across all tax years. Other data provided by Moneybox showed that the percentage of homes bought within the £400,000 and £450,000 range increased from 8% in 2021–22 to 12% in 2024–25.⁹⁴

Figure 6: House purchase price distribution with Moneybox LISAs across all tax years

Source: Letter from Moneybox to the Chair regarding Lifetime ISA data request, 9 April 2025

Property price cap

53. The property price cap for the LISA is £450,000. If a holder withdraws LISA savings to buy a first home at a price greater than the cap, they must pay the 25% withdrawal charge. The cap is designed to ensure that Government bonuses support those who need financial assistance the most.

54. Since the LISA was introduced in April 2017, average house prices in the UK have risen by more than 30%, according to the UK House Price Index.⁹⁵ However, the house price cap remains unchanged since the LISA’s inception. In January 2025, the average UK house price was £269,000, while in London it reached £564,000. Meanwhile, the average first-time buyer home price in Great Britain was £227,000.⁹⁶ The Skipton Group Home Affordability Index predicts that more than 10% of local authority areas in Great Britain will have an average first-time buyer price that exceeds the LISA price cap by Q4 2027.⁹⁷

Figure 7: Proportion of local authority areas in Great Britain where the average first-time buyer house price exceeds the LISA threshold over time

Source: Skipton Group, Skipton Group Home Affordability Index, February 2025

55. We received evidence suggesting that increasing the price cap is necessary, because first-time buyers are purchasing homes later in life.⁹⁸ According to the English Housing Survey, the average age of first-time buyers in England is 34.⁹⁹ Anne Fairweather, Head of Government Affairs and Public Policy, Hargreaves Lansdown, said that “when people started out saving in their LISA, they did not know where house prices were going to go over the decade. They might have started out saving as a single person and then bought as a couple. They may well have moved areas for jobs and so on”.¹⁰⁰

56. Funmi Olufunwa, Hoops Finance, explained that the price cap was penalising people who did the right thing:

People are doing the right thing. They are doing the things that we have told them to do. They want to save for a property. They are doing that and then they feel that the rug is being pulled out from underneath them through no fault of their own because they personally cannot control house prices.¹⁰¹

57. We received evidence from people who have LISA accounts who expressed their frustration that they were unable to use their LISA savings to buy a home due to house price inflation. One LISA holder explained:

[…] like so many young people, my partner and I have spent years working hard, saving diligently, and doing everything “right” in the hope of finally buying a home. But despite careful planning, we have found ourselves restricted by outdated rules that no longer reflect the reality of the housing market.”¹⁰²

58. Many witnesses proposed increasing the price cap. Some argued that any changes to the price cap should be considered alongside changes to the withdrawal charge and that the two issues should not be considered in isolation. Martin Lewis noted that “[t]he argument over the level of the cap is a subsidiary argument to the withdrawal penalty. If you have a withdrawal penalty, the cap is absolutely crucial.”¹⁰³

59. Several witnesses suggested that a rise in the price cap in line with house price inflation would make the LISA more effective.¹⁰⁴ AJ Bell said that “[i]ncreasing the minimum property price and pegging it to house price inflation would be a sensible way of ensuring the product remains useful for first-time buyers.”¹⁰⁵ Plum Fintech, a cash LISA provider, said that the cap would stand at almost £600,000 if it had been increased in line with house price inflation.¹⁰⁶ Moneybox said:

[…] many savers can take 7–10 years to save for a deposit with the LISA and a static house price cap imposes real term cuts in the value of the house they can purchase every year they are saving. This does not inspire long term financial confidence. The house price cap is not about the value of a house that can be purchased with the Lifetime ISA today. It’s about ensuring a generation of savers have confidence in the product going forwards and continue to avail of all the benefits of the LISA as laid out in this submission.¹⁰⁷

60. Other witnesses advocated a more modest increase to the cap. Skipton Building Society said that “the purchase price limit needs to be raised to a minimum of £500,000 to ensure the LISA remains relevant for those it is designed to help.”¹⁰⁸

61. Some witnesses argued that the price cap should be removed completely.¹⁰⁹ Mole Valley Asset Management said that removing it would “reflect the reality of housing markets and avoid discrimination against those of similar financial means in expensive regions.”¹¹⁰ Research surveying 2,000 adults aged 18 to 40 conducted by OneFamily, found that 35% would be more likely to take out a LISA if the £450,000 price cap was removed.¹¹¹

62. We challenged Emma Reynolds MP, Economic Secretary to the Treasury, on whether the price cap should be increased to reflect the increased average house price since the LISA was launched. She explained that the price cap is still well above the average first-time buyer home price:

[…] the house price cap is relatively high. If you look at the difference between the house price caps in the LISA and the Help to Buy ISA, it is a 200 grand uplift from the Help to Buy ISA. From February this year, the average first-time buyer house price was £240,000.¹¹²

63. In response to a Written Parliamentary Question to the Treasury on whether the Government planned to alter the price cap for London, Emma Reynolds MP, Economic Secretary to the Treasury, acknowledged that the capital was an exception:

The property price cap supports most first-time buyers across the UK while targeting households that may find it most difficult to get onto the property ladder. Data from the latest UK House Price Index shows that while the average price paid by first-time buyers has increased since the introduction of the Lifetime ISA, it is still below the LISA property price cap in all regions of the UK except for London, where the average price paid is affected by boroughs with very high property values.¹¹³

64. Laura Webster, Director of Personal Tax, Welfare and Pensions at HM Treasury, explained that “the product was designed to target support at those looking to buy at the lower end of the market. It is still above the average property price for a first-time buyer. It is targeted in that way.”¹¹⁴

4 Retirement saving with the Lifetime ISA

Pension options

66. Alongside a LISA, people can save for their retirement in several different ways, such as a workplace pension, a stakeholder pension, a small self-administered scheme (SASS) or a self-invested personal pension (SIPP). Which savings vehicle a consumer should use to save for their retirement depends in part on their circumstances. The FCA highlighted the risk that “[i]nvestors may not sufficiently understand the differences between the features of a pension and a LISA in order to make informed decisions about the benefits and risks of each for their own circumstances”.¹¹⁵

67. The Association of British Insurers pointed out that “[t]he LISA is not a pension savings product as such, as it has no mechanism to provide a pension income.”¹¹⁶ A LISA and a SIPP are similar in that both offer a private retirement savings option, unlike workplace pension schemes. Many witnesses compared both products, although they have key differences.¹¹⁷ Figure 8 compares the features of the LISA and a SIPP:

Figure 8: SIPP and LISA comparison

Source: Lifetime ISA, gov.uk, (accessed 20 June 2025), MoneyHelper; SIPPs explained: self-invested personal pensions, (accessed 20 June 2025).

Note: Different tax rates apply in Scotland. Those in Scotland who pay the intermediate, higher and advanced rates lose out on tax relief when choosing to save for retirement with a LISA.

Risks and benefits to consumers

68. Several witnesses compared the risks and benefits of using the LISA to save for retirement. Fidelity summarised the disadvantages of using a LISA for retirement saving:

[…] contributions are capped at £4,000; you cannot contribute past the age of 50; you cannot open a LISA past the age of 40; cannot claim higher rate tax relief; early withdrawals have punitive penalties, and the LISA does not have a mechanism to provide a pension income.¹¹⁸

Forgoing employer contributions

69. Under auto-enrolment, employers must make a minimum pension contribution of 3% of the employee’s salary, as long as the employee does not opt out of the scheme.¹¹⁹ If LISA holders opted to make contributions to a LISA rather than a workplace pension scheme, they could lose out on their employer’s matched contribution.¹²⁰

70. Further financial risks could materialise if an individual opted out of pension auto-enrolment altogether. A Report published by the Work and Pensions Committee in 2016, Automatic Enrolment, highlighted concerns before the LISA was launched that the product “could compete with workplace pensions, undermining AE [automatic enrolment] and pension saving”.¹²¹ The Association of Investment Companies also suggested that the LISA “potentially undermines pension autoenrollment”.¹²²

71. Several witnesses warned that the LISA may divert savings away from more suitable pension products, with many stressing that the product should only be used to complement an existing pension.¹²³ SS&C, a provider of administrative services to the financial services industry, wrote that the LISA is not a pension savings product and that “there is a risk that seeking to categorise the LISA as a retirement product will impact the way that features of the LISA are viewed.”¹²⁴

72. Laura Webster, Director of Personal Tax, Welfare and Pensions at HM Treasury, disagreed:

When the product was launched, there was some concern by the pensions industry about the potential for it to undermine automatic enrolment. My experience is that that concern has not materialised. That is not something I hear from the industry anymore. It is seen to be a bit more of a complement than a substitute for workplace pensions.¹²⁵

She added:

Obviously it is not for us to give advice, but where there is an employer contribution you would hope people are taking advantage of that. […] It is definitely something where people should look at the options and decide what is right for them.¹²⁶

Tax relief

73. Higher and additional rate taxpayers lose out on higher tax relief when choosing to save in a LISA rather than a pension scheme, because the bonus received on LISA contributions is equivalent to tax relief at the basic rate.¹²⁷ The Building Societies Association said that “the LISA’s post-tax 25% bonus would still only be suitable for individuals whose earnings place them in the 20% tax bracket; others in a higher tax bracket would be better off via the tax relief provided via saving into a pension.”¹²⁸

74. Other witnesses highlighted the attractiveness of the LISA for basic-rate taxpayers. NatWest Cushon, a NatWest-owned LISA provider, said that for basic-rate taxpayers “[t]he bonus is effectively equivalent to pensions tax relief, funds are accessible and tax- and penalty-free from age 60, and accessible before age 60 (albeit, currently, with a 6.25% penalty)”.¹²⁹

75. Michael Johnson, a former research fellow and one of the architects of the LISA, explained the benefit of withdrawing funds in retirement tax free from a LISA, compared with the tax paid on withdrawing from a pension:

The majority of people in this country are basic rate taxpayers while working and will become basic rate taxpayers in retirement. If one has a choice between a lifetime ISA and a pension product with identical investments in the two, the lifetime ISA will produce, unambiguously, a 17.6% better return, full stop. […] when one is drawing down and withdrawing funds, the lifetime ISA is entirely free of tax. Of the pension pot, 25% is tax-free; the other 75% will be taxed at 20% for the vast majority of people who are basic rate taxpayers. That results in a 17.6% better return for holding a lifetime ISA.¹³⁰

Contribution limit

76. Some witnesses criticised the LISA contribution limit of £4,000. The Building Societies Association said that “[t]he LISA’s current annual cap of £4,000 significantly reduces its potential as a suitable pension product.”¹³¹ Scottish Widows argued that pension contributions should be increased to 12%, with a “strong steer that those who can afford 15% should do so”.¹³² A 15% pension contribution is equivalent to around £5,600 for someone earning the UK median salary of £37,430.¹³³ The Pensions and Lifetime Savings Association suggested that “the maximum annual saving limit allowed under the LISA regulations could also send a strong ‘anchoring’ message to consumers that a contribution rate of no more than £4,000 per annum is sufficient to provide individuals with an adequate retirement income”.¹³⁴

Access to savings

77. Witnesses expressed differing views on whether flexible access to retirement savings is appropriate. Michael Johnson explained the ability to withdraw funds from a LISA removes a barrier to saving for the long-term:

The fundamental point and behavioural aspect of the lifetime ISA is that the saver can choose.

[…] if I put money into a pension I know for certain that I cannot get it until I am 57. Therefore, that is a barrier to saving within that framework. Lifetime ISA was presented with the argument that you can always change your mind.¹³⁵

78. Baroness Ros Altmann, a former Pensions Minister, warned that the LISA, which provides a tax-free pot at age 60, should not be considered a pension and called for its abolition, in its current form:

It incentivises spending the money straight away. Especially in light of the retrospective tax changes just introduced into pensions, there is a heightened risk that people will rush to take their tax-free Lifetime ISA money out as soon as possible, just in case future Governments decide to remove the tax-free status and introduce a retrospective tax on the withdrawals.¹³⁶

79. The FCA highlighted the risk that “[i]nvestors may not realise that, while they will be able to withdraw all of their funds from a LISA when they reach 60, they will be able to access funds accumulated in a personal pension at 58.”¹³⁷

Self-employed people

82. One potential positive use case of the LISA as a retirement savings product was for self-employed people, especially given recent trends in such workers using pensions. In 1998, 48% of the self-employed contributed to a private pension, but by 2018 this had declined to just 16%.¹⁴⁰ Emma Reynolds MP, Economic Secretary to the Treasury, said to us that “when I was Pensions Minister, I was very concerned about the low level of savings of the self-employed.”¹⁴¹ She explained:

The whole point of auto-enrolment is inertia, but you cannot get that if you are self-employed. [The LISA] is one product of a number of products that you can use if you are self-employed and you want to save into a pension.¹⁴²

83. Several witnesses pointed out the attractiveness of retirement saving with the LISA for the self-employed, who do not benefit from matched employer contributions and who favour saving with ISAs rather than pensions for the long term.¹⁴³ Moneybox stated that “The LISA provides a vital alternative for self-employed workers and lower earners, who may not benefit from full employer pension contributions or find traditional pension structures too restrictive.”¹⁴⁴

84. The Personal Investment Management and Financial Association (PIMFA) noted that the volatility of self-employed people’s income means that the “withdrawal flexibility which the LISA as currently constructed offers – albeit with a withdrawal penalty,” is crucial.¹⁴⁵ Anne Fairweather, Head of Government Affairs and Public Policy, Hargreaves Lansdown, said that the self-employed are “afraid to tie up that money. They tend to hoard cash.”¹⁴⁶ She stated:

Where we see most utility for this product in that long-term retirement savings vehicle is for the self-employed, but we think that there need to be some changes to the way in which the product works—not least in terms of the withdrawal penalty, as well as with that age limit—for it to be fully used.¹⁴⁷

85. One self-employed respondent explained why they value saving for retirement with their LISA:

Having this safety net - knowing I could withdraw if I need to - means I actually save more for retirement than I otherwise would. Without a LISA, I wouldn’t be able to save the equivalent into a pension for fear that the money would be permanently inaccessible.¹⁴⁸

86. We asked Emma Reynolds MP, Economic Secretary to the Treasury, who the LISA is targeted at as a retirement saving product. She replied that
“[i]t could be for the self-employed, but it could be for employees who have an employer that is perhaps not matching the amount they are putting in.”¹⁴⁹

5 Value for money for the Government

Cost of Lifetime ISA bonuses

89. The Office for Budget Responsibility (OBR) estimated that spending on LISA bonuses will reach more than £600 million in tax year 2027–28.¹⁵⁰ If the LISA is in part intended to be a policy to support making home ownership more affordable, it is helpful to consider how else that money could be used to achieve this policy aim. The £600 million cost of the LISA is comparable to the Government’s commitment to invest £625 million in training construction workers announced in the March Spring Statement 2025, which is expected to provide up to 60,000 more skilled workers to help build 1.5 million new homes in England in this Parliament.¹⁵¹ Emma Reynolds MP, Economic Secretary to the Treasury, told us that “arguably the biggest impact for first-time buyers will be increasing the supply of homes.”¹⁵²

90. The OBR forecasted that LISA bonuses will cost approximately £3 billion over the five years to 2029–30.¹⁵³

Figure 9: Lifetime ISA annually managed expenditure

Source: HMRC, Annual Report and Accounts 2019 to 2020, 5 November 2020, HMRC, Annual Report and Accounts 2020 to 2021, 4 November 2021, HMRC, Annual Report and Accounts 2021 to 2022, 18 July 2022, HMRC, Annual Report and Accounts 2022 to 2023, 17 July 2023, HMRC, Annual Report and Accounts 2023 to 2024, 30 July 2024, Office for Budget Responsibility, March 2025 Economic and fiscal outlook – detailed forecast tables: expenditure, 26 March 2025. Note: HMRC data is provided net of withdrawal charges.

91. HMRC provided us with a breakdown of Government bonuses paid, shown in Figure 10. Bonuses were aggregated in each year, therefore an individual receiving six bonuses of £100 value would appear once in the ‘£500-£1,000’ band for that year. According to HMRC, half of all bonuses that have been paid were the maximum bonus of £1,000.¹⁵⁴

Figure 10: Number of individual bonuses paid out each year, banded in £500 increments that year

Source: Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025.

Who is helped by the LISA?

93. In examining the value for money of the LISA, we considered whether the LISA is sufficiently targeted towards people who need the money, rather than providing financial assistance to people who would be able to buy a house anyway. If people were able to buy a house without the LISA Government bonus, such bonuses would constitute the dead-weight cost of the policy.

94. Some witnesses expressed concern about the distributional impact of LISA bonuses. The Resolution Foundation wrote that “[u]ltimately, it is those lucky enough to already have quite a bit to save that receive the largest transfer from Government. Data from the Wealth and Assets Survey suggests that, in 2018–20, 47% of LISA wealth was held by individuals in the top household income quintile, suggesting that spending on this policy is highly regressive.”¹⁵⁵ Mole Valley Asset Management agreed that the product’s “design mainly benefits relatively well-off individuals rather than acting as a redistributive tool”.¹⁵⁶

95. SS&C noted that the LISA is a “good product for an investor who will have sufficient liquid savings/investments that they will not need to withdraw from the LISA during any period at which the withdrawal charge would apply. It might therefore be argued that the LISA is comparably a more suitable product for a more affluent individual (who has other financial reserves)”.¹⁵⁷ Baroness Ros Altmann questioned the use of taxpayers’ money on bonuses for those on high salaries who use the LISA for additional retirement saving; “[o]n top of their maximum annual allowance, high-earners get an extra £1,000 of taxpayer subsidy, but is that a sensible use of taxpayer resource?”¹⁵⁸

6 Additional criticisms

Age limit

98. A LISA can be opened by anyone who is less than 40-years-old, and the holder can receive Government bonuses on their contributions to their LISA until the age of 50. Some have called for an increase in the age limit for opening and contributing to a LISA for both home and retirement saving purposes.¹⁵⁹ Quilter, a financial planning business, suggested increasing the age limit for homebuying purposes, stating that “considering that the average age of first-time buyers in England was 34 years in 2023–24, with London slightly higher at 35 years, there is a strong case for increasing the age limit for the Lifetime ISA from 39”.¹⁶⁰ Martin Lewis concurred, arguing that “[a]s people are buying properties at a much older age, [the age limit] is age discrimination.”¹⁶¹

99. Anne Fairweather, Head of Government Affairs and Public Policy, Hargreaves Lansdown told us that the age cap should be addressed, “because the majority of self-employed people are over the age of 40”.¹⁶² Numerous respondents recommended raising the age limit for opening and contributing to the LISA to the Normal Minimum Pension Age, currently at 55, which is set to rise to 57 in 2028.”¹⁶³

100. One witness pointed out that LISA holders aged over 40 are not able to transfer their cash LISA to a stocks and shares LISA, which may increase the likelihood of people pursuing unsuitable investment strategies. They pointed out that you “can only open [a LISA] up to the age of 40, so if you wanted to move your money from a cash LISA to a stocks LISA you would need to make sure you opened both beforehand.”¹⁶⁴

12-month rule

101. First-time buyers are only permitted to withdraw LISA funds for a home purchase after the LISA has been open for 12 months, otherwise they must pay the withdrawal charge. The Building Societies Association argued that “[h]ouse purchases are complex and cannot always be delayed. Removing this rule would be fairer and make the scheme easier to understand”.¹⁶⁵ HMRC’s qualitative research found that some survey respondents supported reconsidering the rule:

There was also low awareness that the LISA account should be open for at least 12 months before withdrawal to buy a house. Some first-time buyers in this research had not been able to make use of their LISA for buying a house due to this rule and felt it should be reconsidered.¹⁶⁶

Universal Credit eligibility

102. When being assessed for eligibility for Universal Credit (UC) and Housing Benefit, a household’s personal savings are considered. UC claimants with savings between £6,000 and £16,000 receive lower payments, and those with savings of more than £16,000 are not eligible for UC at all. When performing this means-tested assessment, the savings a household has in a LISA are included. However, this is not the case for other pension savings such as a SIPP or workplace pension. Therefore, people saving for retirement using a LISA who might otherwise be eligible for UC are at a significant disadvantage compared with people using other pension products.

103. Several witnesses argued that the treatment of LISA savings for means-tested benefits penalises claimants and proposed that LISA savings should be treated in the same way as pension savings. The Pensions and Lifetime Savings Association argued that “being disqualified from receiving means tested benefits can make savers more likely to need to access their savings in case of an emergency”, and are therefore more likely to pay the withdrawal charge.¹⁶⁷ The Resolution Foundation stated that “Given that LISAs have strict restrictions on when savings can be withdrawn, savings should not be treated in the same way as savings in an easy-access savings account”.¹⁶⁸

104. In response to a recent Written Parliamentary Question to the Department for Work and Pensions regarding the exemption of Lifetime ISAs from Universal Credit capital rules, The Rt Hon Sir Stephen Timms MP replied:

There are no plans to change the way savings held in a Lifetime ISA are treated in the assessment of Universal Credit.

It is appropriate that means tested benefits, including Universal Credit, take all forms of savings into account. This includes investments where the Government provides a contribution to encourage saving such as the Lifetime ISA. People will not be required to cash in these ISAs in order to claim Universal Credit, but they will be taken into account as part of their capital.¹⁶⁹

Conclusions and recommendations

Design Challenges

1. We endorse the Government’s policy objectives of supporting first-time buyers and encouraging long-term retirement savings. However, the Lifetime ISA may not be the most efficient use of taxpayers’ money to achieve those disparate objectives, which might require separate, tailored policies. (Conclusion, Paragraph 24)

2. Some Lifetime ISA providers only offer the cash Lifetime ISA. Retirement savings held within cash Lifetime ISAs may not achieve the best outcome for a Lifetime ISA holder over the long term, compared with investing in higher risk but higher return assets such as bonds and equities. (Conclusion, Paragraph 25)

3. An increasing number of people are making unauthorised withdrawals and incurring the withdrawal charge, which may indicate that the Lifetime ISA is not working as intended. (Conclusion, Paragraph 33)

4. Many people have lost a portion of their savings due to a lack of understanding of the withdrawal charge or because of unforeseen changes in their circumstances, such as buying a first home at a price greater than the cap. However, the case for reducing the charge must be balanced against the impact on Government spending. The Lifetime ISA must include a deterrent to discourage savers from withdrawing funds from long-term saving. (Conclusion, Paragraph 46)

Saving for a home with the Lifetime ISA

5. The house price cap for the Lifetime ISA ensures that Government spending supports those who need financial assistance the most. Any increase in the price cap is an increase in Government spending. Before considering any increase in the house price cap, the Government must analyse whether the Lifetime ISA is the most effective way in which to spend taxpayers’ money to support first-time buyers. (Conclusion, Paragraph 65)

Retirement saving with the Lifetime ISA

6. It is difficult for the Committee, the Treasury and the FCA to determine how the Lifetime ISA is being used for retirement saving across the eligible population without additional data. The Lifetime ISA may not have been in existence for sufficient time to support firm conclusions on its suitability as a retirement savings product. (Conclusion, Paragraph 80)

7. We recognise the risks for certain individuals opting to save for retirement in a Lifetime ISA instead of a workplace pension, because of lower tax relief for higher- and additional-rate taxpayers and forgoing employer contributions. Although we recognise that it can be a valuable complementary saving product for many, such as the self-employed and all basic rate taxpayers, the Lifetime ISA may not be a suitable retirement saving vehicle for additional rate taxpayers. Given that HMRC’s 2024 to 2025 projections are that of 37.4 million taxpayers, 29.5 million will be paying the basic rate, the Lifetime ISA could provide a very useful and superior third pillar for basic rate and self-employed taxpayers. (Conclusion, Paragraph 81)

8. The available evidence indicates that saving for retirement with a Lifetime ISA is working well for self-employed people. Any Government reforms to the ISA market must take the interests of the self-employed into account, because self-employed people have historically achieved low levels of retirement saving. (Conclusion, Paragraph 87)

9. The moment at which people purchase their first property offers a singular opportunity for the Government and/or Lifetime ISA providers to explain the merits of the Lifetime ISA as a retirement savings vehicle. (Recommendation, Paragraph 88)

Value for money for the Government

10. Given the scale of demand on the public finances, the Government must carefully consider whether significant spending on the Lifetime ISA is the best way of achieving its policy objectives. (Conclusion, Paragraph 92)

11. Data concerning Lifetime ISA use by its target market is mixed and inconclusive. We are concerned that Lifetime ISA bonuses may involve significant spending of taxpayers’ money in a way that may not be precisely targeted. Without better quality data on Lifetime ISA holders, it is difficult to estimate the impact of the product across the income distribution. The findings from HMRC’s quantitative research should reveal insights into the demographic and savings profile of Lifetime ISA holders. Without these findings, we are unable to conclude whether the Lifetime ISA is helping its intended recipients. (Conclusion, Paragraph 96)

12. The Treasury must use income distribution impact assessments to assess whether the Lifetime ISA effectively targets people who need financial support. If the Lifetime ISA does not achieve that objective, the Treasury should consider whether the LISA has a future in its present form. (Conclusion, Paragraph 97)

Additional criticisms

13. The Government’s argument that the LISA should be included within a Universal Credit eligibility assessment because the Government has contributed to the balance within the LISA is inconsistent. The Government provides higher levels of contribution through tax relief to many other pension products that are not included in the Universal Credit eligibility assessment, such as workplace pensions and SIPPs. Treating one retirement product differently from others in that regard is nonsensical. (Conclusion, Paragraph 105)

14. If the Government wants to encourage long-term saving for retirement through Lifetime ISAs, it must treat the savings in a Lifetime ISA in the same way as other pension savings products as part of the Universal Credit means test. (Recommendation, Paragraph 106)

15. If the Government is unwilling to equalise the treatment of the Lifetime ISA with other Government-subsidised retirement savings products in Universal Credit assessments, Lifetime ISA products must include warnings that the Lifetime ISA is an inferior product for anyone who might one day be in receipt of Universal Credit. Such warnings would guard against savers being sold products that are not in their best financial interests, which might well constitute mis-selling. (Recommendation, Paragraph 107)

Formal Minutes

Tuesday 24 June 2025

Members present

Dame Meg Hillier, in the Chair

Dame Harriett Baldwin

Chris Coghlan

Bobby Dean

John Glen

John Grady

Dr Jeevun Sandher

Yuan Yang

Lifetime ISA

Draft Report (Lifetime Individual Savings Account), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 107 read and agreed to.

Summary agreed to.

Resolved, That the Report be the Eighth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Adjournment

Adjourned till Wednesday 25 June at 9.45 am.

Witnesses

The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.

Wednesday 26 February 2025

Martin Lewis, Founder and Executive Chair of Money Saving Expert; Funmi Olufunwa, Finance Expert and Founder of Hoops Finance; Michael Johnson, Research FellowQ1–123

Anne Fairweather, Head of Government Affairs and Public Policy at Hargreaves Lansdown; Charlotte Harrison, Chief Executive of Home Financing at Skipton Building Society; Richard Stone, Chief Executive at the Association of Investment Companies; Brian Byrnes, Head of Personal Finance at MoneyboxQ1–123

Wednesday 23 April 2025

Emma Reynolds MP, Economic Secretary to the Treasury, HM Treasury; Laura Webster, Director of Personal Tax, Welfare and Pensions, HM TreasuryQ124–236

Published written evidence

The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.

LISA numbers are generated by the evidence processing system and so may not be complete.

1 AJ Bell LISA0205

2 Altmann, Baroness Ros (Peer, House of Lords) LISA0185

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125 Anonymised LISA0031

126 Anonymised LISA0021

127 Anonymised LISA0022

128 Anonymised LISA0023

129 Anonymised LISA0024

130 Anonymised LISA0025

131 Anonymised LISA0026

132 Anonymised LISA0027

133 Anonymised LISA0028

134 Anonymised LISA0029

135 Anonymised LISA0030

136 Anonymised LISA0016

137 Anonymised LISA0017

138 Anonymised LISA0018

139 Anonymised LISA0019

140 Anonymised LISA0020

141 Anonymised LISA0002

142 Anonymised LISA0003

143 Anonymised LISA0004

144 Anonymised LISA0005

145 Anonymised LISA0006

146 Anonymised LISA0007

147 Anonymised LISA0008

148 Anonymised LISA0009

149 Anonymised LISA0010

150 Anonymised LISA0011

151 Anonymised LISA0012

152 Anonymised LISA0013

153 Anonymised LISA0014

154 Anonymised LISA0015

155 Anonymised LISA0056

156 Anonymised LISA0052

157 Anonymised LISA0032

158 Association of British Insurers LISA0194

159 Association of Financial Mutuals LISA0190

160 Association of Investment Companies LISA0211

161 BlackRock LISA0206

162 Bright Blue LISA0099

163 Building Societies Association LISA0188

164 Damianova, Dr E (Assistant Professor, Durham University) LISA0131

165 Federation of Small Buisnesses LISA0180

166 Finder LISA0087

167 Foresters Financial LISA0129

168 Hargreaves Lansdown LISA0208

169 Hoops Finance Limited LISA0197

170 IPSE - The Self-Employment Association LISA0196

171 International, Fidelity LISA0214

172 JPMorganChase LISA0198

173 James Naish MP LISA0182

174 Johnson, Michael LISA0209

175 Johnson, Michael LISA0095

176 Johnson, Mr Michael LISA0177

177 My Safe Home Limited LISA0072

178 Metropolitan Police Friendly Society LISA0156

179 Mole Valley Asset Management ltd LISA0148

180 Moneybox LISA0173

181 NatWest Cushon LISA0215

182 OneFamily LISA0193

183 PIMFA LISA0187

184 Pensions and Lifetime Savings Association LISA0195

185 Plum Fintech LISA0152

186 Prospect LISA0204

187 Quilter LISA0133

188 Quoted Companies Alliance LISA0159

189 Resolution Foundation LISA0207

190 SS&C LISA0183

191 Skipton Building Society LISA0212

192 Skipton Building Society LISA0203

193 Tembo Money LISA0174

194 The Association of Investment Companies (AIC) LISA0181

195 The Independent Order of Oddfellows Manchester Unity Friendly Society LISA0191

196 The Investing & Saving Alliance LISA0169

197 The Investment Association LISA0213

198 UK Finance LISA0179

199 West Brom Building Society LISA0192

200 moneysavingexpert.com LISA0116

List of Reports from the Committee during the current Parliament

All publications from the Committee are available on the publications page of the Committee’s website.

Session 2024–25

Number	Title	Reference
7th	Re-appointment of Nikhil Rathi as Chief Executive of the Financial Conduct Authority	HC 912
6th	Acceptance of cash	HC 324
5th	Appointment of Ric Lewis as Chair of the Crown Estate	HC 683
4th	Appointment of Niamh Moloney to the Prudential Regulation Committee	HC 783
3rd	Appointment of David Soanes to the Prudential Regulation Committee	HC 776
2nd	Appointment of Andrea Enria to the Prudential Regulation Committee	HC 775
1st	The Office for Value for Money	HC 521
1st Special	SME Finance: Government Response	HC 517

---

Footnotes

1 HM Treasury, Budget 2016: George Osborne’s speech, 16 March 2016

2 Treasury Committee, Lifetime ISA Terms of Reference, 7 January 2025

3 HM Revenue and Customs, Registered Individual Savings Account (ISA) managers (accessed 24 June 2025)

4 The Investing and Saving Alliance (LISA0169)

5 Oral evidence taken on 21 May 2025, Q110 [Debbie Crosbie]

6 Unpublished evidence received by Moneybox

7 Q1

8 West Bromwich Building Society (LISA0192)

9 Oral evidence taken on 20 May 2025, Q77 [Ian Stuart]

10 Oral evidence taken on 20 May 2025, Q78 and Q79 [Charlie Nunn]

11 Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025

12 Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025

13 The Investing and Saving Alliance (LISA0169), Building Societies Association (LISA0188)

14 OneFamily (LISA0193)

15 Building Societies Association (LISA0188)

16 Tembo Money (LISA0174)

17 Q73

18 Treasury Committee, Household finances: income saving and debt, October 2018

19 Financial Conduct Authority, CP16/32: Handbook changes to reflect the introduction of the Lifetime ISA, November 2016, p6

20 Financial Conduct Authority, CP16/32: Handbook changes to reflect the introduction of the Lifetime ISA, November 2016, p10

21 Financial Conduct Authority, COBS 14 Annex 1 Lifetime ISA information, (accessed 12 June 2025)

22 HM Revenue and Customs, Understanding the use of the Lifetime ISA: qualitative research, 22 April 2025

23 HM Revenue and Customs, Understanding the use of the Lifetime ISA: qualitative research, 22 April 2025

24 Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025

25 HM Treasury, Lifetime ISA rules changed to help people whose incomes are affected by Coronavirus, 1 May 2020. The withdrawal charge was reduced temporarily because of the financial difficulties people were facing.

26 Quilter (LISA0133)

27 Baroness Ros Altmann (Peer at House of Lords) (LISA0185)

28 Pensions and Lifetime Savings Association (LISA0195)

29 The Independent Order of Oddfellows Manchester Unity Friendly Society (LISA0191)

30 Metropolitan Police Friendly Society (LISA0156)

31 Skipton Building Society (LISA0203)

32 Skipton Building Society (LISA0203)

33 Letter from Moneybox to the Chair regarding Lifetime ISA data request, 9 April 2025

34 Letter from Moneybox to the Chair regarding Lifetime ISA data request, 9 April 2025

35 Foresters Financial (LISA0129)

36 Anonymous (LISA0176)

37 Q51

38 Q69

39 Pensions Policy Institute, Lifetime ISAs- the international evidence, PPI Briefing Note Number 82, June 2016. The research used evidence from the pension systems of Australia, New Zealand, the United States, Canada and Singapore.

40 Financial Conduct Authority, CP16/32: Handbook changes to reflect the introduction of the Lifetime ISA , November 2016, p9

41 Q2

42 Office of Tax Simplification, Savings income: Routes to simplification, May 2018

43 Letter from Moneybox to the Chair regarding Lifetime ISA data request, 9 April 2025

44 Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025

45 Q155

46 Q149

47 Michael Johnson (LISA0095), Bright Blue (LISA0099), moneysavingexpert.com (LISA0116), Moneybox (LISA0173), Baroness Ros Altmann (Peer at House of Lords) (LISA0185), Prospect (LISA0204), AJ Bell (LISA0205), NatWest Cushon (LISA0215)

48 The Independent Order of Oddfellows Manchester Unity Friendly Society (LISA0191)

49 Hargreaves Lansdown (LISA0208)

50 Q183

51 HM Revenue and Customs, Lifetime Individual Savings Account tables, (accessed 24 June 2025)

52 HM Revenue and Customs, Lifetime Individual Savings Account tables, (accessed 24 June 2025)

53 HM Revenue and Customs, Lifetime Individual Savings Account tables, (accessed 24 June 2025)

54 HM Revenue and Customs, Lifetime Individual Savings Account tables, (accessed 24 June 2025), Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025

55 Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025

56 Letter from HM Revenue and Customs to the Chair regarding Lifetime ISA data request, 9 April 2025

57 Q177

58 Financial Conduct Authority, FG22/5 Final non-Handbook Guidance for firms on the Consumer Duty, July 2022, p3

59 UK Finance (LISA0179), OneFamily (LISA0193), UK Finance (LISA0179), Baroness Ros Altmann (Peer at House of Lords) (LISA0185)

60 Association of British Insurers (LISA0194)

61 Q156

62 Foresters Financial (LISA0129)

63 Building Societies Association (LISA0188)

64 Q168

65 Q170

66 Anonymous (LISA0007), Anonymous (LISA0028), Anonymous (LISA0029), Anonymous (LISA0032), Anonymous (LISA0040), Anonymous (LISA0112), Quoted Companies Alliance (LISA0159), The Investing & Saving Alliance (LISA0169), UK Finance (LISA0179), SS&C (LISA0183), Anonymous (LISA0186), Skipton Building Society (LISA0203), JPMorganChase (LISA0198)

67 HM Revenue and Customs, Understanding the use of the Lifetime ISA: qualitative research, 22 April 2025. Research consisted of 50 in-depth interviews and conclusions cannot be drawn for the wider population.

68 Quoted Companies Alliance (LISA0159)

69 moneysavingexpert.com (LISA0116)

70 AJ Bell (LISA0205)

71 Foresters Financial (LISA0129)

72 Moneybox (LISA0173)

73 Moneybox (LISA0173)

74 Bright Blue (LISA0099), moneysavingexpert.com (LISA0116), Metropolitan Police Friendly Society (LISA0156), Moneybox (LISA0173), UK Finance (LISA0179), Federation of Small Businesses (LISA0180), Building Societies Association (LISA0188), Association of British Insurers (LISA0194), IPSE - The Self-Employment Association (LISA0196), Skipton Building Society (LISA0203), Prospect (LISA0204), AJ Bell (LISA0205), Hargreaves Lansdown (LISA0208), Fidelity International (LISA0214), NatWest Cushon (LISA0215)

75 Skipton Building Society (LISA0203)

76 SS&C (LISA0183)

77 Q13

78 AJ Bell (LISA0205)

79 Q33

80 Association of British Insurers (LISA0194)

81 Q156

82 Q172

83 Q176

84 Institute for Government, Homeownership for young adults has recovered to its 2010 level, 29 May 2024

85 Skipton Building Society (LISA0203)

86 Skipton Group, Skipton Group Home Affordability Index, February 2025

87 Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025

88 Ministry of Housing, Communities & Local Government, English Housing Survey 2023–24, November 2024. HM Revenue and Customs, Lifetime Individual Savings Account tables, (accessed 24 June 2025)

89 Pensions and Lifetime Savings Association (LISA0195)

90 Moneybox (LISA0173)

91 OneFamily (LISA0193)

92 Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025

93 Letter from Skipton Building Society to the Chair regarding Lifetime ISA data request, 14 April 2025

94 Letter from Moneybox to the Chair regarding Lifetime ISA data request, 9 April 2025

95 HM Land Registry, UK House Price Index summary: January 2025, 26 March 2025

96 HM Land Registry, UK House Price Index summary: January 2025, 26 March 2025

97 Skipton Group, Skipton Group Home Affordability Index, February 2025

98 Anonymous (LISA0112)

99 Ministry of Housing, Communities & Local Government English Housing Survey 2023–24, November 2024, p34

100 Q85

101 Q23

102 Anonymous (LISA0200)

103 Q43

104 moneysavingexpert.com (LISA0116), Quilter (LISA0133), Metropolitan Police Friendly Society (LISA0156), Moneybox (LISA0173), Tembo Money (LISA0174), The Association of Investment Companies (AIC) (LISA0181), PIMFA (LISA0187), The Independent Order of Oddfellows Manchester Unity Friendly Society (LISA0191), Association of British Insurers (LISA0194), Hoops Finance Limited (LISA0197), Skipton Building Society (LISA0203), AJ Bell (LISA0205)

105 AJ Bell (LISA0205)

106 Plum Fintech (LISA0152)

107 Moneybox (LISA0173)

108 Skipton Building Society (LISA0203)

109 Foresters Financial (LISA0129), Mole Valley Asset Management ltd (LISA0148), UK Finance (LISA0179), OneFamily (LISA0193), Q41 [Michael Johnson]

110 Mole Valley Asset Management ltd (LISA0148)

111 OneFamily (LISA0193). The survey population was weighted to be nationally representative.

112 Q180

113 Written Parliamentary Question to the Treasury, UIN 40302, 21 March 2025

114 Q162

115 Financial Conduct Authority, CP16/32: Handbook changes to reflect the introduction of the Lifetime ISA , November 2016, p9

116 Association of British Insurers (LISA0194)

117 Anonymous (LISA0002), Anonymous (LISA0014), Anonymous (LISA0023), Anonymous (LISA0028), Anonymous (LISA0056), Anonymous (LISA0057), Anonymous (LISA0061), Anonymous (LISA0068), Bright Blue (LISA0099), Anonymous (LISA0166), Anonymous (LISA0117), Dr E Damianova (Assistant Professor at Durham University) (LISA0131), Anonymous (LISA0168), UK Finance (LISA0179), Association of British Insurers (LISA0194), JPMorganChase (LISA0198), Anonymous (LISA0201)

118 Fidelity International (LISA0214)

119 Workplace pensions, gov.uk, (accessed 11 June 2025)

120 Bright Blue (LISA0099), Pensions and Lifetime Savings Association (LISA0195), Financial Conduct Authority, CP16/32: Handbook changes to reflect the introduction of the Lifetime ISA, November 2016, p9

121 Work and Pensions Select Committee, Eleventh Report of Session 2015 – 16, Automatic Enrolment, HC 579, p17

122 The Association of Investment Companies (AIC) (LISA0181)

123 Anonymous (LISA0009), Anonymous (LISA0014), Anonymous (LISA0045), Michael Johnson (LISA0095), Anonymous (LISA0112), Plum Fintech (LISA0152), Anonymous (LISA0171), Moneybox (LISA0173), NatWest Cushon (LISA0215)

124 SS&C (LISA0183)

125 Q154

126 Q207

127 FCA, Consultation Paper Handbook changes to reflect the introduction of the Lifetime ISA CP16/32, November 2016, p20. Different tax rates apply in Scotland. Those in Scotland who pay the intermediate, higher and advanced rates lose out on tax relief when choosing to save for retirement with a LISA.

128 Building Societies Association (LISA0188)

129 NatWest Cushon (LISA0215)

130 Q3

131 Building Societies Association (LISA0188)

132 Scottish Widows, Retirement Report 2024, p6

133 Office for National Statistics, Employee earnings in the UK: 2024, 29 October 2024. According to the Office for National Statistics, UK median gross annual earnings for full-time employees were £37,430 in April 2024.

134 Pensions and Lifetime Savings Association (LISA0195)

135 Q18

136 Baroness Ros Altmann (Peer at House of Lords) (LISA0185)

137 Financial Conduct Authority, CP16/32: Handbook changes to reflect the introduction of the Lifetime ISA, November 2016, p9

138 Different tax rates apply in Scotland. Those in Scotland who pay the intermediate, higher and advanced rates lose out on tax relief when choosing to save for retirement with a LISA.

139 HM Revenue and Customs, Table 2.1: Number of individual Income Tax payers by marginal rate, sex and age, (accessed 24 June 2025)

140 Institute for Fiscal Studies, Retirement for the self-employed, October 2020

141 Q166

142 Q206

143 Anonymous (LISA0056), Anonymous (LISA0061), Moneybox (LISA0173), NatWest Cushon (LISA0215)

144 Moneybox (LISA0173)

145 PIMFA (LISA0187)

146 Q101

147 Q68

148 Anonymous (LISA0056)

149 Q207

150 OBR, Expenditure Detailed Forecast Tables, March 2025

151 HM Treasury, Spring Statement 2025, March 2025

152 Q138

153 OBR, Expenditure Detailed Forecast Tables, March 2025

154 Letter from HM Revenue and Customs to the Chair regarding quantitative and qualitative research on the Lifetime ISA, 30 April 2025

155 Resolution Foundation (LISA0207), M Broome, A Corlett & J Leslie, ISA ISA Baby: Assessing the Government’s policies to encourage household saving, Resolution Foundation, January 2023

156 Mole Valley Asset Management ltd (LISA0148)

157 SS&C (LISA0183)

158 Baroness Ros Altmann (Peer at House of Lords) (LISA0185)

159 The Investing & Saving Alliance (LISA0169), Association of British Insurers (LISA0194)

160 Quilter (LISA0133)

161 Q65

162 Q101

163 Anonymous (LISA0036), The Investment Association (LISA0213), BlackRock (LISA0206), Hargreaves Lansdown (LISA0208), IPSE - The Self-Employment Association (LISA0196)

164 Anonymous (LISA0176)

165 Building Societies Association (LISA0188)

166 HMRC, Understanding the use of the Lifetime ISA: qualitative research, 22 April 2025

167 Pensions and Lifetime Savings Association (LISA0195)

168 Resolution Foundation (LISA0207)

169 Universal Credit: Individual Savings Accounts, UIN 46426, 17 April 2025