LISA subscriptions jump by a quarter to

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Lifetime ISA subscriptions jumped 25.3% to £474m last year from a year ago, with 87,250 account holders withdrawing cash to buy a home for the first time, the latest official data shows.  

However, 129,200 people made unauthorised withdrawals, losing £102m in charges, according to HMRC figures, fuelling criticism about flaws in the product. 

The number of people buying a home through the product lifted by 30,500 from a year ago, withdrawing on average £15,782, up £857 on last year.

The data comes after the Treasury Committee last week renewed its call on the government to set out a timetable of reform for LISAs ahead of the November Budget — labelling the savings scheme as “a confused product that requires reform.”    

Quilter tax and financial planning expert Rachael Griffin says: “The LISA data reinforces the need for reform.” 

She points out that the unauthorised withdrawals figure “is up from £75m the year before and almost twenty times the level seen in the product’s early years.  

“These are not reckless savers but people under financial pressure, penalised by a 25% charge that strips away not just the government bonus but part of their own contributions too.” 

Griffin adds: “The LISA is a muddled product, attempting to be both a house deposit account and a retirement plan but failing to do either adequately.  

“The £450,000 property cap is outdated, the age limits are no longer realistic, and the penalty continues to cause resentment, confusion and undermines confidence in saving.” 

LISAs, launched in 2017, allows people under 40 to open an account and put in up to £4,000 each year until they’re 50. At the end of each tax year, this is topped up by a 25% bonus from HMRC. It has a £450,000 threshold cap on house purchases.    

However, Hargreaves Lansdown head of personal finance Sarah Coles says: “More people paid into a LISA than in any other year since launch – including the pandemic.  

“For some, this was an opportunity to build vital savings for retirement.  

“Meanwhile, others realised that higher savings rates and strong stock markets, combined with the government bonus, was a golden opportunity to overcome the challenges of recovering house prices and build a bigger property deposit.” 

In June, the Treasury Committee released a critical report on the product, which said that LISA’s dual objective to help people save for the short-term to buy a home and long-term makes it “more likely consumers will choose unsuitable investment strategies”.   


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