FTBs in financial need pay the price for saving into Lifetime ISAs

Rob Houghton, CEO of reallymoving comments on the news that FTBs in financial need pay the price for saving into Lifetime ISAs.

“The Government’s policy of including Lifetime ISAs in the £16,000 savings limit for accessing Universal Credit makes no financial sense at all and risks undoing years of hard work by diligent First Time Buyers.

“It advises that savers should refrain from using Lifetime ISAs as short-term savings products, because in doing so they could get back less than they paid in due to the 25% penalty applied to withdrawals. Yet conversely, savers are now being encouraged to do exactly that.

“For most people it takes years and a huge amount of effort to save a deposit for a first home, which is now £23,500 on average according to our latest data, yet through no fault of their own many first time buyers are being forced to tap into their nest egg in order to pay the bills in the short-term.

“At the very least the unfair 25% withdrawal penalty should be reduced to ensure the saver always gets back what they paid in, but the Government should go further and remove Lifetime ISAs from the Universal Credit savings limit altogether. Failure to do so could set today’s generation of First Time Buyers back several years, on top of the additional challenges of rising loan to values, meaning they could need to save an even larger deposit, and a weaker jobs market.”