The survey finds that 46% of customers opened their accounts to buy a first home, while 45% did so to save for retirement or later life.  

LISAs, 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.  

The study comes after a critical report by the Treasury Committee in June, which said that the dual objective of the product makes it “more likely consumers will choose unsuitable investment strategies”. 

The government has also said it is “looking at options for reforms” when it comes to ISAs to encourage investing money, with changes expected in the November Budget.

The HMRC survey found that 90% of LISA holders said the government bonus was a ‘very important’ factor that led them to open the account. 

LISAs have attracted widespread criticism because it carries a 25% early withdrawal charge if customers take out cash without buying a home, which effectively acts as a 6.25% exit penalty on their savings.   

The study, which was conducted in January and released this week, finds that 11% of LISA holders had made unauthorised withdrawals by the time of the research.  

This includes 3% who made an unauthorised withdrawal to purchase a property outside of the LISA rules, and 8% who made an unauthorised withdrawal for another reason. 

However, when Economic Secretary to the Treasury Emma Reynolds appeared before the Treasury Committee in April she defended early withdrawal penalties.  

Reynolds said: “We can’t have a risk-free option of investing for the long-term. We would not have that situation.” 

Around £213m has been paid in withdrawal charges from 286,000 people in the six tax years to April 2024, according to the Treasury Committee.  

MPS add that since 2018–19, LISAs have been used to buy 182,500 homes.  

The average withdrawal from LISAs to buy a home in tax year 2023–24 was £15,000.  

Since 2017, 6% of adults who have ever been eligible have opened a LISA, with around 1.3 million accounts still open.