With potential changes to Individual Savings Accounts (ISAs) on the horizon in the Autumn Budget, the Lifetime ISA (LISA) is under critical review, raising questions about its viability for long-term financial planning.
Launched in April 2017 in George Osbourne’s final Budget in March 2016, the LISA was originally seen as a hybrid savings vehicle, part pension, part property support. Yet eight years later, its uptake has been tepid. According to the Treasury Select Committee, only one in seven ISA providers currently offer LISAs, reflecting industry scepticism around its complexity and strategic value.
In its June report, the Committee highlighted three key concerns:
- Early Withdrawal Penalty: A 25% charge on non-qualified withdrawals often results in savers losing more than the government bonus they originally received. HMRC raised £75 million in such charges in 2023/24 suggesting the product may not be aligned with user needs.
- Conflicting Objectives: The dual-use nature, retirement at age 60 vs. first-time property purchase under £450,000, creates tension in investment strategy. Particularly concerning is the limited access to diversified investment options, with many LISAs offered only in cash form.
- Public Cost vs. Private Benefit: Though capped at £4,000 per year, the LISA government bonus is projected to cost the Exchequer £3 billion through 2029/30. For a nation balancing fiscal pressure and demographic shifts, the benefit-to-cost ratio may not justify continued support.
What are the takeaways?
For families looking to future-proof intergenerational wealth, and for those navigating pension legacy, now is the time to re-evaluate how LISAs fit into broader financial architecture. Before committing capital, consult an adviser versed in bespoke retirement structuring, inheritance planning, and business exit strategies.
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
Tax treatment varies according to individual circumstances and is subject to change. The Financial Conduct Authority does not regulate tax advice.
5th September 2025
