Savers should be warned about potential pitfalls of Lifetime Isas, MPs say
Warning savers using Lifetime Isas are at risk of making poor financial decisions
- A parliamentary committee has warned that Lifetime Isas (LISAs) are leading people to make poor financial decisions due to their complexity and dual purpose for home buying and retirement savings.
- MPs highlighted that the dual objective often results in unsuitable investment choices and called for explicit warnings, particularly for those who might receive universal credit, as LISAs can affect benefit eligibility unlike other pension products.
- The committee criticized the 25 per cent withdrawal charge for unauthorized access, noting it causes savers to lose not only the government bonus but also 6.25 per cent of their own contributions.
- Data from 2023-24 showed nearly twice as many unauthorized withdrawals from LISAs compared to purchases of first homes, suggesting the product may not be functioning as intended.
- Concerns were raised about the £3 billion projected cost of LISA bonuses to the Treasury, questioning if it is the best use of public funds and whether the product effectively targets those most in need.