"George Osbourne launched LISAs in his 2016 Budget. The idea was to help people save for their first home or retirement, but the product itself is not fit for that purpose and now costs the Government £3bn a year. The LISA allows the user to put in a maximum of £4,000 of savings a year, with the Government then adding a further 25% for every £1 contributed, thus giving a maximum saving of £5,000 a year."
"However, drawing down on these funds when you are not making a first-time house purchase or before you are 60, will lead to a clawback on the bonus paid by the Government as well as a 5% charge applied on the amount withdrawn. Meaning LISA funds become nearly untouchable for many people. To put the £3bn per year cost of LISA's into context, it is 36% of the annual IHT tax take in 2024/25."
The Lifetime ISA (LISA), introduced in 2016, aims to help first-time buyers and retirement savers but currently costs the Government £3bn annually. Contributions are limited to £4,000 per year with a 25% government bonus, yielding up to £5,000 annual support. Eligibility covers ages 18–39 with contributions allowed until age 50. Withdrawals for purposes other than a first home purchase or before age 60 trigger a bonus clawback and a 5% charge, making funds effectively inaccessible for many. The scheme also caps eligible property purchases at £450,000, complicating Shared Ownership use. Proposed reforms include ending government bonuses and permitting unrestricted withdrawals of up to 50% to boost liquidity.
Read at London Business News | Londonlovesbusiness.com
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