Young savers penalized when buying homes above £450,000 limit
Martin Lewis, founder and chair of MoneySavingExpert.com (MSE), is calling on Chancellor Jeremy Hunt to address the "unfair" aspects of lifetime ISAs in his Autumn Statement. Lewis argues that young savers should not be fined and lose their hard-saved cash when purchasing homes above the scheme's £450,000 limit. With house prices surging in recent years, more people could potentially be at risk than when lifetime ISAs were launched in 2017.
Immediate solution needed for penalized Lisa savers
MSE is urging the government to allow savers using Lisa money to withdraw it without penalty if they are buying a home above the £450,000 limit. Currently, these savers not only lose the 25% bonus promised by the government but also face fines when trying to access their own money. Lewis believes that this penalization is unnecessary and that these savers should at least be able to retrieve their own funds and interest.
Raising the Lisa limit and linking it to house prices
In the longer term, MSE proposes raising the £450,000 Lisa limit to keep up with average property price growth. They also suggest index-linking the threshold to house prices in order to provide a fairer system for future savers. This way, individuals opening a Lisa account can have a legitimate expectation that they will be able to use their savings to purchase the type of house they desire.
Real stories of Lisa savers losing money
MSE highlighted the stories of two individuals who faced financial losses due to the Lisa limit. Andreas Hyde, 29, and his partner had to forfeit some of their own Lisa savings to purchase a two-bedroom flat in London that was £20,000 above the limit. They collectively lost around £1,500 of their own savings and £6,000 in government bonuses. Similarly, Dan Adams, 25, and his girlfriend were unable to use their Lisas to buy a house in Hertfordshire because it exceeded the limit. They lost around £1,500 of their own savings and £6,000 in government bonuses as well.
Treasury keeps Lisa under review
A Treasury spokesperson stated that the Lifetime Isa helped over 50,000 people get on the property ladder last year. While the average price of a first-time home has increased, it remains below the cap for the majority of the country. The spokesperson also emphasized that all aspects of the savings rules, including the Lisa, are continuously reviewed.
