The LISA is one of a few remaining mechanisms available to help young people in London make their dream of home ownership a reality and we should, rightly, put it in the spotlight.
Introduced by George Osborne back in his 2016 budget, the Lifetime ISA (LISA) was designed with aspiring first time buyers in mind. It promised a new way to encourage those under 40 to start saving for a home of their own earlier in life while, at the same time, providing incentives to motivate them to plan ahead for a comfortable retirement.
In practice, allowing them to save or invest up to £4000 each tax year with a 25% government bonus on top of their contributions, up to £1000 until the age of 50.
Nine years on and the Treasury Select Committee (TSC) has launched a, long awaited, review which is looking to understand if the product's original design continues to meet the needs of young savers now and into the future.
With recent HMRC data showing over 1.5 million people across the UK are currently saving with a LISA across the country, now feels like a prime opportunity to consider how we enhance what has already proven to be a transformational product that has helped nearly quarter of a million people across the UK buy their first home.
In London, the number of houses purchased in London using a Moneybox Lifetime ISA jumped 49% in 2024. Against a backdrop of spiraling property prices over the last decade, and the fact that the average cost of a house in London outstrips the national average at £511,000, it is clear why young people across the capital are turning to the LISA for help. Despite a LISA property purchase price cap of £450,000, Moneybox LISA-enabled FTBs who bought their first home in London last year, paid £367,000 on average, having saved £17,637 in their Lifetime ISA towards their deposit, which included a government bonus of £3,211.
As the UK’s largest provider of LISAs, Moneybox is a witness to the power of the product everyday. And the benefits extend way beyond empowering individuals to buy their first home sooner than they otherwise would have. The LISA has transformed how young people save, with nearly 8 in 10 current LISA savers reporting that they are saving more frequently and more consistently since they opened the product. It is these embedded saving habits that will equip future generations with the skills they need to plan for the future with greater confidence and to achieve their financial potential in life.
While we know the LISA is already working for the majority, without a doubt, some of the original product rules need updating to reflect changing market conditions. Given the significant rise in property prices over the last decade, the static property price cap needs revisiting annually to ensure the LISA remains fit for purpose into the future. In addition, adjusting the withdrawal penalty while preserving the long-term savings intent of the LISA, would assist in ‘future proofing’ the product.
As a product that is changing the savings habits of a generation, the future design of the LISA deserves due care and attention to ensure many generations to come continue to benefit from it.
Brian Byrnes is head of personal finance at Moneybox.
