ISAs  

Good riddance to 'riddled with risks' Lisa

Alan Lakey, director of CIExpert and Highclere Financial Services, agreed with the MPs the Isa system was too complex to entice people to save.

He said: "One problem has been the constant change that has taken place - removal of child trust fund, introduction of Junior Isas, adjustment of Isa allowances, introduction of first £1,000 interest being tax-free, introduction of Help to Buy Isa -  for most people it is all too confusing and they have to rethink strategies."

Keith Churchouse, director and chartered financial planner at Guildford-based Chapters Financial Limited, echoed this.

He said: "Some argued that the Lisa was doomed from its start in April 2018, noting that it was planned to effectively replace the Help to Buy Isa launched on 1 December 2015.

"This Help to Buy option is coming to an end in just over a years’ time on 30 November 2019. We have received some calls from younger investors confused about the options, and sadly confusion usually creates concern, even fear especially when looking at what to do with their hard earned and scarce cash, which can then lead to inaction."

Other industry experts have also highlighted the poor take-up rates for the Lisa.

Tim Bennett, Partner at Killik & Co, said: "The Lisa has turned out to be something of a niche savings vehicle that, whilst potentially useful in certain specific circumstances, is nonetheless riddled with risks for the unwary.

"It blurs the distinction between buying property and saving for retirement, separate goals that require different savings strategies. It also comes with strict restrictions, in particular around how it is used to buy property, plus stiff penalties for misuse – this is therefore no product for anyone afraid of small print."

However, despite the criticism, some have said the Lisa has actually started to become popular.

Martin Stead, chief executive of Nutmeg, said: "The Lisa has triggered many of our customers to invest for the first time and be motivated to achieve one of their most important lifetime goals – buying their first home."

He said the average timeframe his Lisa customers planned to invest for was 16-years.

"This shows younger people are beginning to plan ahead with their savings. Helping them to do so is imperative and a behaviour that must be encouraged more."

aamina.zafar@ft.com