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January 8, 2025
A review into whether Lifetime ISAs are still ‘fit for purpose’ has been launched by the Treasury Committee.
Lifetime ISAs launched in 2017 offering under 40s the opportunity to get a 25% government bonus of up to £1,000 a year on their savings towards a first home (which must cost under £450,000) or their retirement (read on for more details on how they work). Almost 230,000 people have used LISAs to help them buy a house according to HMRC data and 1.5m people are currently saving into a LISA.
One of the main criticisms of Lifetime ISAs is the withdrawal penalty. You’ll need to pay withdrawal fees of 25% if you want to use the money for any other reason than buying a first home costing under £450,000, you’re over 60, or you’re terminally ill with less than 12 months to live. This means you can get back less money than you put in.
Another criticism is the cap on the price of a house you can buy using your LISA is £450,000 and this hasn’t changed since the scheme was launched despite house price growth.
MPs are gathering views on a number of different questions including:
MPs are also considering issues around the use of LISAs as a pensions saving vehicle.
Submissions can be made on the Treasury Committee website here. The deadline for submitting evidence is Tuesday 4 February.
Chief Executive of the HomeOwners Alliance Paula Higgins says, ‘First time buyers in 2025 are facing an enormous challenge when getting on the property ladder, with high rental costs making it even harder to save house deposits.
‘Lifetime ISAs are a way of helping people achieve property ownership, and the security and happiness that brings, especially to those without the Bank of Mum and Dad to give them financial support and those living in areas of high house prices where the deposit is the biggest hurdle.
‘We urge the government not to abolish Lifetime ISAs: our research shows 1.9 million aspiring homeowners do not think they will follow in the footsteps of their home owning parents. And the LISA offers them vital support.
In light of this review, we’re advising consumers that if they haven’t already done so, they may want to open a LISA if it is something they may want to have in the future, in the event they are abolished for people who haven’t already signed up. You can open one with just £1, find out how in our Best Lifetime ISAs guide.
‘If, as is hoped, the Lifetime ISA is retained as a savings vehicle, we do think there are a number of areas where it needs improving. We would like to see the withdrawal penalty reformed so that you’ll only have to pay back the government bonus and not lose any of your own money if you withdraw your money from the scheme. We would also like to see the house price cap increased each year to keep up with increasing house prices.’
Anyone aged 18-39 can open a Lifetime ISA and you can save up to £4,000 each tax year into your LISA and the government will give you a 25% bonus on your contributions, up to a maximum of £1,000 per year until you’re 50.
You can save into your LISA by putting in a lump sum, regular savings or just putting away money when you can. Whether you pay in a lump sum or regular payments your bonus will be paid monthly, provided you’ve contributed that month. And it usually takes between four and nine weeks to hit your account.
There are two types of LISAs – cash LISAs and stocks and shares LISAs. But bear in mind that while you can hold more than one LISA at any given time you can only pay into one LISA in each tax year.
Read more in our guide on the Best Lifetime ISAs.
March 25, 2025 
