MPs Warn Over Lifetime ISAs, Urge Reform

A cross-party Treasury Committee has warned that Lifetime ISAs (LISAs), introduced in 2017, are overly complex and may not represent the best use of public funds. The committee found that LISAs' dual-purpose design can lead savers to make poor investment decisions, especially for retirement savings. Early withdrawals incur a 25% penalty, effectively causing savers to lose 6.25% of their own money. The committee also highlighted that LISA savings can reduce eligibility for benefits such as Universal Credit and housing benefit, unlike other pension schemes, raising concerns about potential mis-selling. MPs are calling for reform or at least mandatory warnings to protect claimants and those for whom LISAs may be unsuitable. The government has stated it is considering ISA reform in response to the committee's findings.