The Treasury Committee is dismayed that the government has not set out a timetable of changes to Lifetime ISAs ahead of the November Budget — which it calls “a confused product that requires reform.”    

In the committee’s June report on LISAs, it was “unconvinced” that the product “targets people in genuine need of financial support”. 

It added that the product could lead to customers putting their “savings at risk” and may not be the best use of public money. 

MPs also found that the 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”. 

The product, launched in 2017, allows people under 40 to open a LISA 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.  

The scheme also allows customers to save for their retirement. 

MPs have called for LISA savings to be treated in the same way as other pension savings in relation to the Universal Credit means test.  

But the committee says it has not seen any real evidence of LISA reform from the government, which would be required ahead of the 26 November Budget. 

It says: “In the absence of such reform, the committee argues that LISAs should be labelled as an inferior product and include warnings that they may disadvantage anyone who might one day claim Universal Credit.  

“Although the government’s willingness to consider including such a warning is welcome, it falls short of a concrete commitment to address that issue.” 

Treasury committee chair Dame Meg Hillier (pictured) adds: “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.”  

“Recently published research by HMRC based on a sample of LISA holders found that 87% of those who had used their LISA to buy their first home said that they could have done so without their LISA.  

“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.”  

Hillier points out that “the government has an opportunity at the Budget to think again on the LISA, for would-be first-time buyers and those saving for retirement alike.”