By Jonathan Watts-Lay, Director, WEALTH at work
The LISA (Lifetime ISA) at present is quite complex as it is trying to do too many things – help with a first house purchase whilst at the same time be a potential savings vehicle for retirement. Instead of ditching the LISA completely, thought should be given to making it the key savings vehicle to help individuals save for a deposit to buy their first home only.
After all, due to the guaranteed bonus, the LISA is an ideal option to help them save for a deposit faster than using a standard savings account as in essence the government bonus gives a guaranteed 25% return.
I doubt many people are currently saving into a pension at the expense of saving for a deposit on their first home but by getting into the savings habit early and benefitting from the guaranteed bonus they will be able to save for their first home more quickly than would otherwise be the case. This means not only do they get their first home earlier but having reached that goal sooner they may then be able to allocate more money to other savings vehicles such as pensions earlier than may otherwise have been the case. There is significant interest in LISA for house purchase within the workplace as employers view it as a potential benefit that would appeal to their younger employees, unfortunately there is a lack of LISA providers which is hindering this.
As we know, the workplace already supports individuals with various savings vehicles to help them with their short, medium and long term savings goals. This includes workplace ISAs, share schemes and pensions. Such variety allows individuals to choose a savings method, or a combination of methods, which are the most appropriate for them at a given point in time. In summary LISA should stay but be amended as a vehicle for first time house purchase only.