Source · Select Committees · Treasury Committee
Recommendation 2
2
Acknowledged
Cash Lifetime ISAs may not achieve optimal long-term retirement outcomes compared to invested assets.
Conclusion
Some Lifetime ISA providers only offer the cash Lifetime ISA. Retirement savings held within cash Lifetime ISAs may not achieve the best outcome for a Lifetime ISA holder over the long term, compared with investing in higher risk but higher return assets such as bonds and equities. (Conclusion, Paragraph 25)
Government Response Summary
The government reiterated the purpose and success of the Lifetime ISA and stated that it keeps all aspects of the policy under review and carefully considers all representations received, without committing to specific action on the performance of cash LISAs.
Government Response
Acknowledged
HM Government
Acknowledged
The LISA encourages younger people to save towards later life at the same time as being able to save for their first home. In particular, the Government recognises the historically high gap between house prices and earnings and has made it a priority is to support first time buyers. As of 2023/24, there were over 1.3 million LISA accounts open and, since its introduction in 2017, the LISA has helped 227,600 people purchase their first property. To ensure the product is well targeted, the property price cap (£450,000) supports most first-time buyers across the UK, including those households who may find it difficult to get onto the property ladder, which the Committee’s report has acknowledged. In addition, the withdrawal charge ensures that the LISA has been used for its intended purposes: homeownership for first time buyers or later life savings. The Government collects comprehensive data on LISAs. This includes published Annual savings statistics, the most recent being from September 2024. HMRC shared further data on LISAs with the Committee in the letter dated 9 April 2025, including LISA market value, number of LISAs open, opened and closed in each tax year, and number of individuals incurring withdrawal charges. HMRC also shared data with the Committee in the letter dated 30 April 2025, including a regional breakdown of house purchases, the number of bonuses paid and authorised withdrawal sizes. Finally, HMRC has undertaken and published qualitative research on LISA users which explores their experiences, and on non-users to understand what the barriers are for eligible individuals. The research and data inform the Government’s policy decision making. The Government keeps all aspects of the Lifetime ISA policy under review and carefully considers all representations received.