Chancellor Rachel Reeves left the Lifetime Isa untouched during her Autumn Budget speech today (30 October).
Calls were made ahead of the Budget for her to reduce the early withdrawal charge on the Lifetime Isa (Lisa) from 25% to 20%. Some commentators have also argued that the Lisa limit should be raised to £600,000.
The 25% early withdrawal charge currently imposed effectively acts as a 6.25% exit penalty.
AJ Bell director of public policy Tom Selby slammed the charge as “deeply unfair”.
He said it “punishes” those for whom a change of circumstances means they cannot pursue their homeownership aspirations.
Rajan Lakhani, a spokesperson for money app Plum, said he was “disappointed” that Lisas were not addressed.
“Penalties are hitting more and more first-time buyers as house prices continue to soar.
“Our recent research showed that HMRC has charged some people more than £11,000 to withdraw their Lisa – a huge amount of money for any first-time buyer.
“Most local authorities in London and 28 local authorities outside London have an average house price of above £450,000.
“This leaves first-time buyers stuck when they finally save enough to buy their first home.”
Lakhani said it is “high time” that the situation is made fairer for first-time buyers.
“We’ve been campaigning for the Lisa limit to be raised to £600,000,” he added.
“It’s important to remember that an increase to this amount would only bring the limit more or less in line with house price inflation since the Lisa was launched in 2017.”
He argued that this was a “missed opportunity” for the government to “take a stand” for the country’s young people by raising the limit.
The government first launched the Lisa in April 2017, to help young people to save for their first home.
Those wishing to open an account must be 18 or over but under 40.
Up to £4,000 can be put into a Lisa each year until the age of 50. The first payment into a Lisa must be made before the age of 40.
The government adds a 25% bonus to contributions, up to a maximum of £1,000 per year.
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