Senior MPs have called for a significant overhaul of Lifetime ISAs, citing stringent rules on cash withdrawals that result in customers having less money than they initially deposited.
This, they argue, leads to poorer investment decisions by Britons, while the government allocates excessive spending for bonuses, as reported by .
Chancellor Rachel Reeves is set to deliver her key Mansion House speech in two weeks' time, where she is anticipated to announce reforms to savings plans and bolster the 海角视频's retail investment culture.
READ MORE: {}
The Treasury Select Committee has identified serious issues with the Lifetime ISA, a scheme introduced under former Chancellor George Osborne. They suggest that Britons might be better off investing in "higher risk but potentially higher return products such as bonds and equities."
This type of savings account allows individuals under 40 to save for their first home or retirement, with the government adding a bonus of up to £1,000 on contributions made by holders.
Funds can only be withdrawn tax-free after the age of 60 or for the purpose of buying a home worth up to £450,000.
A recent report from the Treasury Select Committee highlights that the spike in charges last year for 99,560 unauthorised withdrawals indicates that the tax wrapper is not functioning as planned.
The 25 per cent charge means holders could lose 6.25 per cent of their own savings, MPs have suggested.
Most Read
The committee has raised concerns over whether the £3bn earmarked by the government for Lifetime ISA bonuses up to 2030 is a judicious use of funds, especially "given the current strain on public finances".
They also criticised rules that penalise benefits claimants as "nonsensical", noting that holders of savings in a Lifetime ISA might be less eligible for certain Universal Credit benefits.
Meg Hillier, chair of the Treasury Select Committee, acknowledged MPs' general support for the Lifetime ISA's benefits to self-employed individuals and first-time homebuyers but questioned the justification for substantial government spending on it.
"The question is whether the Lifetime ISA is the best way to spend billions of pounds over several years to achieve those goals," Hillier remarked.
She highlighted the timeliness of the government's impending ISA reform to evaluate if the Lifetime ISA is the optimal approach to assist those in need.
It is understood that Reeves is contemplating reducing the amount individuals can contribute to cash ISAs, aiming to encourage more 海角视频 investment through stocks and shares ISAs.
Moneyfacts data indicates that the average return rate for a stocks and shares ISA between 2024 and 2025 was 11.9%, significantly higher than the 3.8% for a standard cash ISA.
Don’t miss
A government spokesperson commented: "Lifetime ISAs aim to encourage younger people to develop the habit of saving for the longer term, helping them to purchase their first home or build a nest egg for when they're older.
"We welcome the committee's report and will now review its findings and respond in due course."
Reeves expected to highlight pension reforms
It is anticipated that Reeves will utilise the Mansion House Speech on July 15 to draw attention to pivotal pension reforms and auto-enrolment, outlined by minister Torsten Bell in the Pension Schemes Bill.
The Federation of Small Businesses (FSB) has voiced concerns over potential new regulations expected in the later stages of the government's pensions review this year. These could exert additional strain on businesses throughout the 海角视频, potentially resulting in elevated prices and reduced recruitment.
Most alarming to businesses are the potential doubling of employer pension contributions—which a survey by the FSB found more than a third of firms believe could lead to hiring fewer workers—and the prospect of reducing the threshold for employer pension contributions from £6,240 to zero, cited by half of the firms as a cause for raising prices.
Tina McKenzie, Policy Chair of the Federation of Small Businesses, expressed: "Entrepreneurs have taken on auto-enrolment, absorbed the costs, navigated the jargon, and kept paying into their staff's pensions even when their own margins have fallen. But goodwill has limits.
"The more complex and expensive the system becomes, the more we risk pushing employers from willing participants into reluctant bystanders.
"This is not about resistance to pension reform, it's about the cumulative burden of regulation and the rising cost of employment."
"Small firms are already feeling the pinch – NICs and wage increases are really taking their toll – and any new reforms could push many to breaking point."