The Autumn Statement: A missed opportunity for young savers.
The Chancellor made his Autumn Statement on Wednesday and we were hoping to see him announce some much-needed reforms to the Lifetime ISA. Unfortunately, he didn’t alter the Lifetime ISA rules, and the opportunity to make some simple changes to it to make it work for more young people was missed.
What we wanted to see
We wanted to see the £450,000 house price cap lifted in line with rising house prices, which have grown more than 30% since the product was launched in 2017. By not doing this, we will see an increasing number of young people who live in areas where starter homes cost more than the cap not being able to benefit from the Government bonus. We’ll also see a growing number of young people who have spent years paying into a Lifetime ISA face a 25% penalty fee when they come to buy a house because prices where they want to buy have risen steeply and exceed the cap. Although the majority of people who hold a Lifetime ISA with us buy homes well under the cap, it is unfair to those who live in high price areas and it should have been addressed.
We were also hoping to see the penalty fee for withdrawing cash early or buying a home over the cap reduced to 20% like it was during the pandemic. We’re in the middle of a cost-of-living crisis and people should not have to face losing any of their own money if they need emergency access to it. It’s an unfair penalty fee for young people who have saved hard, and the Government needs to reduce the fee so people only ever risk losing the Government bonus, never their own money.
Other reforms to the Lifetime ISA we would have liked to have seen were a change to the age limit that people can open an account, increasing it from 40 to 45, and allowing people to pay in money up to the age of 60 rather than 50. Both of these things would allow more people to benefit from the Government bonus paid on their savings.
What we’d like to see happen next:
We’d urge the Government to look at these issues urgently to make the Lifetime ISA more accessible to more young people. People saving for their first home and retirement need to save more than ever as the cost-of-living continues to increase, and the 25% Government bonus paid on top of what people put in is a real boost that makes savings grow faster.
The next Budget will take place in the spring and we urge the Government take these factors into consideration and announce new reforms that will enable more people to benefit from the generous bonus paid on the account.
