The government consultation on replacing the Lifetime ISA with a First Time Buyer ISA closes tonight.
The possible new product will be solely for first-time buyers and not for the dual purpose of retirement saving as the Lifetime ISA was.
The Lifetime Isa has drawn criticism, both for the withdrawal penalties and the maximum price limit for first-time buyers purchasing a home, both of which have limited its take up.
Quilter proposition director Sam Christopher said: “In little more than a decade, we have seen the Help to Buy ISA, the Lifetime ISA and now the proposed First Time Buyer ISA. In that time, aspiring homeowners have had to navigate huge affordability pressures, and the homebuying process was only made more challenging by the changing rules, conditions and stipulations within these products that have not always reflected the realities of the housing market.
“We are pleased that the government has recognised that the Lifetime ISA was a confused product in desperate need of simplification, but the success of the proposed First Time Buyer ISA will depend entirely on the detail and whether it delivers the simplicity, clarity and flexibility needed for a house purchase.
“The LISA attempted to serve two very different purposes in helping people save for a property and for retirement, but this complexity and the confusion it caused undermined its potential for success. A more clearly targeted product would avoid that confusion, but it must also retain the features that worked for savers.”
The government’s consultation says the new product will be aimed first-time buyers of all ages from 18 onwards.
Rather than charging penalties for early withdrawals, the scheme will pay savers a bonus on exchange of contracts when the funds are used to buy a first home.
Savers will be able to contribute up to an as-yet-unspecified annual limit, which will count towards their overall ISA allowance.
The savings can be used to buy any UK property up to a certain value, which has yet to be determined, provided it is purchased with a mortgage.
Cash-only home purchases will not be eligible.
