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Nucleus calls for greater clarity on lifetime ISAs

HMRCHM Revenue and Customs, the UK tax authority, closes its consultation on Lifetime Individual Savings Accounts (Lisa) today amid concerns that the tax-free product may not be fit for purpose.

Currently the rules state that a person can save up to £4,000 (€4,680) each year and receive a government bonus of 25% – that’s a bonus of up to £1,000 a year.

The goal of Lisa is to provide an effective way of saving for individual goals. People can use some or all of the money to buy their first home, or stay invested until reaching 60 years of age.

Rachel Vahey, product technical manager at fund platform wrapper Nucleus, said that much of the detail remains unclear.

Among other recommendations, Nucleus says people should be allowed to withdraw money before the age of 60 without incurring a 25% charge on the government bonus, which is currently proposed. 

Other recommendations include:

  • All self-employed people can open a Lifetime Isa up to age 50.
  • All communications should make it clear the Lifetime Isa is neither a direct substitute for a pension nor has the full flexibility of an Isa.
  • Simplify the Isa regime.
  • Merge Help to Buy Isa and Lifetime Isa.
  • The Government carry out comprehensive study of what action people will take on the introduction of Lifetime Isa and to regularly monitor and report on the effects after launch, including details of revenue raised from withdrawal charges.
  • Allow adviser charging as a non-charge withdrawal.
  • Set the withdrawal charge at 20%.
  • All communications should be clear the withdrawal charge will reclaim government bonus (plus interest) as well as a charge on member contributions.
  • Raise the Lifetime Isa annual payment limit and review this each year based on house price increases.

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