Lifetime ISA subscriptions jumped 25.3% to £474m final yr from a yr in the past, with 87,250 account holders withdrawing money to purchase a house for the primary time, the most recent official knowledge reveals.
However, 129,200 individuals made unauthorised withdrawals, shedding £102m in expenses, in response to HMRC figures, fuelling criticism about flaws within the product.
The variety of individuals shopping for a house by way of the product lifted by 30,500 from a yr in the past, withdrawing on common £15,782, up £857 on final yr.
The knowledge comes after the Treasury Committee final week renewed its name on the federal government to set out a timetable of reform for LISAs forward of the November Budget — labelling the financial savings scheme as “a confused product that requires reform.”
Quilter tax and monetary planning knowledgeable Rachael Griffin says: “The LISA knowledge reinforces the necessity for reform.”
She factors out that the unauthorised withdrawals determine “is up from £75m the yr earlier than and virtually twenty occasions the extent seen within the product’s early years.
“These usually are not reckless savers however individuals beneath monetary strain, penalised by a 25% cost that strips away not simply the federal government bonus however a part of their very own contributions too.”
Griffin provides: “The LISA is a muddled product, trying to be each a home deposit account and a retirement plan however failing to do both adequately.
“The £450,000 property cap is outdated, the age limits are now not sensible, and the penalty continues to trigger resentment, confusion and undermines confidence in saving.”
LISAs, launched in 2017, permits individuals beneath 40 to open an account and put in as much as £4,000 every year till they’re 50. At the top of every tax yr, that is topped up by a 25% bonus from HMRC. It has a £450,000 threshold cap on home purchases.
However, Hargreaves Lansdown head of private finance Sarah Coles says: “More individuals paid right into a LISA than in some other yr since launch – together with the pandemic.
“For some, this was a chance to construct important financial savings for retirement.
“Meanwhile, others realised that increased financial savings charges and robust inventory markets, mixed with the federal government bonus, was a golden alternative to beat the challenges of recovering home costs and construct a much bigger property deposit.”
In June, the Treasury Committee launched a vital report on the product, which mentioned that LISA’s twin goal to assist individuals save for the short-term to purchase a house and long-term makes it “extra possible customers will select unsuitable funding methods”.
