Major financial firm Moneybox has urged the government not to scrap the Lifetime ISA (LISA), instead proposing improvements to the existing product. The call comes as Chancellor Rachel Reeves announced changes to ISA products, including a cut to the cash ISA limit from April 2027 and a review of the LISA. The government is considering replacing the LISA with a new 'first-time buyer ISA' by 2028, citing concerns over its dual purpose and withdrawal penalties.
Moneybox's Three-Point Plan
Moneybox, the UK's largest LISA provider, argues that the LISA is effective for the majority of users, supporting consistent saving and better long-term financial outcomes. The firm has proposed a three-point plan to address key issues:
- Withdrawal penalty: Reduce the current 25% charge for early withdrawals to make the product more flexible.
- Property price cap: Increase the £450,000 limit to reflect rising house prices, particularly in London and the South East.
- Dual purpose clarity: Better communicate the product's benefits for both first-time home buying and retirement savings.
Industry and Consumer Reactions
Martin Lewis, founder of MoneySavingExpert, has made an urgent plea for an overhaul of Lifetime ISAs, warning that scrapping the product could harm savers. The government's proposed replacement, the 'first-time buyer ISA', would focus solely on home purchases, potentially leaving retirement savers without a suitable alternative.
Separately, Moneybox reported record 2025 revenues of £115 million and a significant increase in customer numbers. The firm also raised its Cash ISA rate to 4.75 per cent, making it one of the most competitive offers on the market.
As the consultation on ISA reforms continues, stakeholders are calling for a balanced approach that preserves the LISA's benefits while addressing its shortcomings.
