Its findings suggest that the LISA’s dual-purpose design and withdrawal charges were not fit for purpose.
Reacting to the consultation, Rebecca William, financial planning divisional lead at Rathbones, said: “A more focused product that is solely geared towards getting on the housing ladder should be easier to understand and use in practice, particularly as it removes the withdrawal penalty that proved so contentious with the LISA.
“However, this comes at the expense of the Lifetime ISA, which did offer under‑40s another tax‑efficient route to build savings for later life.”
Simplicity overlooking real challenge
William, among others, highlighted that the overarching aim of simplicity will come at greater cost than has been addressed.
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Rachel Vahey, head of public policy at AJ Bell, commented: “Savers will lose out on the investment growth they could have earned on the bonus while building up their deposit. For some first-time buyers, that could mean having less money available when they come to purchase a home.”
William added: “While a simpler savings vehicle is a step forward, it doesn’t change the fundamental challenge facing first-time buyers.
“Younger generations are contending with a double squeeze of high rents and elevated living costs, making it increasingly difficult to build a deposit. As a result, the traditional milestone of homeownership is drifting into the mid‑30s for many.”
Unanswered questions
Rachael Griffin, tax and financial planning expert at Quilter, said the house price cap not being confirmed poses several issues.
She said: “The house price cap of £450,000 has been unchanged since the LISA first launched in 2017 and has become increasingly detached from reality in many parts of the country.
“This has resulted in many people who have saved diligently, particularly those living in London and the South East, being unable to use their LISA for the property they need without facing a penalty.”
Vahey added that the consultation neglected to account for self-employed individuals.
She said: “The Treasury has been strikingly quiet on what this means for self-employed people saving for later life.
“Those who already have a Lifetime ISA will be able to keep saving, but that does nothing for the thousands of self-employed workers and others without access to a workplace pension who may need a flexible retirement savings option in future.”
The consultation has prompted questions on how fitting the final product will be.
Jasvinder Gakhal, CEO of money at Skipton Building Society, said: “The Skipton Group Home Affordability Index shows the average first-time buyer home will exceed the current cap in around 10% of local authority areas across Great Britain by the end of 2027. The new scheme must keep pace with the market.”
