The Treasury Committee has painted a damning picture perhaps most notably with the Lifetime Individual Savings Account (LISA). This account is one of the most important legacies of the 2017 Conservative government. The committee reiterated that LISAs are not appropriate for everyone. There were legitimate fears about the mis-selling of these complex financial products. As discussions surrounding reforms intensify ahead of the November Budget, MPs are urging ministers to take more decisive action to address these issues.
Lifetime ISAs, available to those under 40, can be used to save for retirement or buy a first home. Each participant can save a maximum of £4,000 per year, and the government provides a 25% bonus on total contributions. However, despite these generous incentives, just 6% of eligible adults have opened a LISA and only about 1.3 million accounts are currently active.
The subsequent Treasury Committee report expressed doubts about the impact and cost of LISAs. Government estimates indicate that these accounts will be £3 billion in the red over the next five years. This stokes fears that spending taxpayer dollars like this is a good idea.
“Given that the LISA is forecast to cost the government £3bn over the next five years, this raises the question whether the LISA is a good use of taxpayers’ money,” – Dame Meg Hillier
Meg Hillier, chair Treasury Committee previously, announced that some steps have finally been taken to improve the LISA design. She thinks that these measures fall short of what’s required. She added that the LISA remains a complex product in need of considerable reform to ensure it meets the needs of savers effectively.
“The government has taken some steps towards improving the Lifetime ISA, but I do not believe they have gone far enough. The Lifetime ISA is a confused product that requires reform,” – Dame Meg Hillier
The ongoing debate focuses on whether LISAs should continue in their current form or undergo significant changes to enhance their accessibility and effectiveness. The very low uptake even among all eligible adults casts still more doubt on the product’s appeal, practicality and viability.
