The Treasury Select Committee has welcomed government proposals to scrap the Lifetime ISA following a consultation next year.
In the Budget, the Government confirmed it will launch a consultation in 2026 on a new, simpler ISA product to support first time buyers purchasing a home.
Once available, this new product will be offered in place of the Lifetime ISA.
The Committee’s previous report on the Lifetime ISA concluded that it is too complex and raised concerns around the dual purpose of saving for both a home and retirement resulting in poor outcomes for savers.
Chair of the Treasury Select Committee, Dame Meg Hillier, said: “We argued that it would make more sense to create two separate, tailored policies which genuinely help people achieve these goals.”
The Lifetime ISA was introduced in 2017 and is available to those aged between 18 and 39, allowing them to save up to £4,000 every year towards a first home or retirement, with the Government adding a 25% bonus on top. Savings can be used to purchase a property worth up to £450,000.
However, it has attracted criticism for its spend limit, with rising property prices outpacing £450,000 in some areas of the country, and the penalty for withdrawing money early.
Hillier added: “The Chancellor acknowledging the need to replace the Lifetime ISA with a simpler product specifically to help people saving for a home is a step in the right direction. We look forward to seeing what the Treasury proposes next year.”
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