The Government’s flagship Lifetime Isa scheme (LISA), was launched in 2017 to help millennials get onto the property ladder. It has been a huge success. The government will then add a 25% bonus to these savings, with a maximum payout of?1,000 per annum. This “free money” offer comes with a catch. It can only be used to pay off a pension or buy a home for a maximum of?450,000. Savings can only be withdrawn if the saver is diagnosed with a terminal disease. The penalty charge is 25%. To save a deposit, a LISA would take over a quarter century. Matt McKenna, head for communications at personal finance comparison site finder.com, stated that it does not seem like a practical way for Londoners to climb the property ladder. He was also concerned about the fact that LISAs can only be used to purchase properties worth?450,000. He said that it was becoming more difficult to find such a property in London. “Londoners could see the house price limit being raised. “READ MORE
Critics say the government’s new Lifetime ISA will not help London’s first-time purchasers to manage high deposits
Legal Q&A: What is a Lifetime Investment Account (ISA) and how can I get one?
Answers to the most frequently asked questions by first-time buyers about buying a home
Many people believe that the penalty for withdrawing money is too high. In fact, the government did reduce the penalty to 20% at the beginning of the pandemic (March 2020 to March 2021), so that those who lost their income suddenly wouldn’t have to pay withdrawal charges to the Government. This was three times higher than the pre-pandemic levels. The firm believes that a penalty of 25% is unfair and calls for it to be reduced from 25% to 20%. Martin Shaw, CEO of Association of Financial Mutuals, said that the Government should not penalize people who need to access LISA savings in an emergency and be more transparent about how the penalty system works. He stated that there is an opportunity to make it clearer upfront. “We believe that the penalty should not be suspended indefinitely. This would allow the LISA to be matched with ISA accounts. Shaw believes that the LISA is a good option to increase savings, provided you are certain you won’t have to dip into the money. He said that the amount you can pay in to the LISA is limited and that he would encourage people to use it as long as they are certain they can make the long-term commitment.
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