Chancellor Jeremy Hunt did not make any changes to the Lifetime Isa in today’s Budget speech, despite launching a new British Isa to encourage investment into the UK.
There had been calls for an updating of the Lifetime Isa rules to enable more people to use these tax-efficient vehicles to get on the housing ladder.
There had been calls to reduce the penalties imposed on early access, and increase the maximum property that can be bought using these funds. Currently those using their Lifetime Isa funds to put down a deposit on a first-home can only do so for properties priced up to £450,000 — a level that has not changed since these savings plans were introduced in 2017, despite rampant house price inflation since then, particularly in the South East.
Aegon head of pensions Kate Smith says: “First time buyers and those using Lifetime Isas (Lisa) to save for their retirement will be disappointed that the Chancellor didn’t take the opportunity to modernise the Lisa rules. Various rules and restrictions are failing to keep up with the times.
“Currently, you can’t open a Lisa once you pass age 40, can only contribute a maximum of £4,000 per year, and can no longer contribute once you hit 50. Raising the maximum age for taking out a Lisa, say to 50, would have made them available to a wider audience, while allowing contributions to continue, possibly to 55, could have enabled Lisa savers to build up larger sums, particularly if using the product as a retirement savings vehicle. The annual contribution limit is also restrictive and has not been increased since introduced back in 2017.
“The current property purchase cap of £450,000 is causing problems for prospective first-time buyers particularly in areas of high property process.
“Omitting a modernisation agenda for Lisas from the Budget is a missed opportunity particularly for those aspiring to be first time buyers.”