UK Treasury consults on replacing Lifetime ISA with First Time Buyer ISA

The UK government has closed its consultation on replacing the Lifetime ISA (LISA) with a new First Time Buyer ISA. The proposed product would be specifically designed for first-time buyers aged 18 and older, removing the dual purpose of retirement saving that characterized the LISA.

Under the proposed rules, instead of monthly bonus payments, savers would receive a single bonus upon the exchange of contracts. Critics, including the platform Moneybox, have warned that this change could reduce compound growth by approximately £3,606 for a typical 10-year saver. Moneybox also noted that banning transfers from Stocks & Shares to Cash versions as completion approaches could leave deposits vulnerable to market volatility.

Industry experts have described the LISA as a “confused product” due to its complex dual goals. While the new ISA aims for simplification, concerns remain regarding the potential widening of the deposit gap. Moneybox has urged the Treasury to evolve the existing LISA rather than launching a new product, suggesting an annual review of the £450,000 house price cap to ensure it remains relevant to the housing market.