Lifetime Isa to stay despite calls for abolition

Lifetime Isa to stay despite calls for abolition

The Lifetime Isa (Lisa) scheme will continue despite facing criticism and calls for its abolition earlier this year.

Philip Hammond, chancellor of the Exchequer, made no changes to the Isa regime, other than to confirm the £20,000 subscription limit for adult Isas and to announce upratings of the annual subscription limit for the Junior Isa and Child Trust Fund in line with the consumer prices index (CPI).

The Lisa was introduced in April last year offering a 25 per cent government bonus to a younger generation of savers wishing to save for retirement or buy a first home.

Savers aged between 18 and 40 are eligible for the bonus on savings of up to £4,000 per year.

In July the Treasury select committee called for the abolition of the Lisa claiming it was too complex and offered "perverse incentives" inconsistent with other parts of the long-term savings landscape.   

The MPs argued that there was little evidence that tax relief was an effective way of encouraging potentially vulnerable households to save for the future.

A month later HM Revenue and Customs (HMRC) published figures showing Lisa sales had failed to live up to government expectations, with 166,000 accounts opened last year - short of the 200,000 target.

But calls for the scheme’s abolition were met with industry criticism as providers rallied in support of the Lisa, with Newcastle Building Society and Nottingham Building Society both launching a cash Lisa in the last few months and praising the "genuinely beneficial" savings product.

Although only three cash Lisas are available in the market, the Lisa is offered more widely in a stocks and shares form, with Hargreaves Lansdown, OneFamily and Nutmeg offering the product amongst others.

Lisa provider OneFamily has been particularly vocal in support of the scheme, responding to HMRC figures in August showing Lisa bonus payments had matched that of rival Help to Buy Isa in half the time.

Speaking at the time Nici Audhlam-Gardiner, managing director of Lifetime Isas at OneFamily, urged the government to add "further weight" to promoting the Lisa and claimed it was a "huge help" to the younger generation in achieving two of life’s biggest financial challenges.