A leading financial firm has told the government to fix – rather than replace – the Lifetime ISA (LISA) as it supporting “better long-term financial outcomes” for those using it.
Rachel Reeves last year announced incoming changes to several ISA products, which are accounts in which money can generally grow tax-free, either through saving or investment.
In the case of the LISA, the government are conducting an ongoing review with an eye to replace it with an entirely new product, with a “first time buyer ISA now expected to launch in 2028.
Concerns over the existing LISA include it having a sometimes-confusing dual purpose, being both for buying a first home and for saving towards retirement, as well as the penalty for using it outside the rules – such as buying a property which exceeded the £450,000 price cap – which would see people lose some of their original cash as well as the government bonus.
Now, Moneybox, the UK’s leading LISA provider, has told the government to avoid “costly policy theatre” by making tweaks to the product rather than risking “reintroducing challenges that the LISA was designed to address”.
The company’s three-point plan in an open letter asks Labour to:
- Retain the LISA for new customers instead of introducing a replacement product
- Commit to an annual review of the house price cap to ensure it keeps pace with market conditions
- And reduce the withdrawal penalty to 20 per cent so that savers are not unfairly penalised.
Brian Byrnes, director of personal finance at Moneybox, said: “The evidence shows the LISA is working for the vast majority of users, supporting consistent saving and better long-term financial outcomes. With over 1.5 million active savers relying on it, a consultation risks adding unnecessary complexity for consumers without addressing the underlying issues used to justify replacing the product.
“As the UK’s largest LISA provider, we will engage constructively with HM Treasury to ensure any future approach builds on what works, strengthens saving behaviour, and delivers sustainable support for first-time buyers.”
The government have previously said anyone who already holds a LISA will be able to continue adding to it.
Meanwhile, savings microtrends are helping people save more frequently and successfully, according to research from Tesco Bank.
Microtrends for savings includes setting small but regular amounts aside to reach specific goals, holding different savings pots for different needs and using money apps to automatically round-up spending.
In addition, challenges such as mindful spending, the 1p challenge or people paying themselves first as a bill have all contributed to better financial empowerment and confidence, says the research, with two in five (40 per cent) feeling more in control of their savings and nearly a third (32 per cent) feeling the moves make their savings goals feel more within reach.
Separately, Moneybox have lifted their Cash ISA rate to 4.75 per cent, including a 12-month bonus.
A maximum of three withdrawals per year are allowed without affecting the rate, meaning it will not be suitable for those who regularly dip into their savings or know they’ll need to use cash with some frequency, but the high rate will be a draw to others as UK inflation pushes above 3 per cent again this year.
This is the last financial year in which savers can put the full £20,000 into a cash ISA if they wish; as of April 2027, a maximum of £12,000 can be saved as cash with the reminder of the allowance reserved for investing, as part of the raft of changes announced by Ms Reeves.
On Wednesday, Moneybox posted record 2025 revenue of £115m, up almost a quarter (23 per cent) year on year and with customer numbers up almost a third (31 per cent), reaching 1.7m in total.
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