The Lifetime Isa (LISA) will remain available to the savers under 40, the government has confirmed, despite calls from the Treasury Select Committee for it to be scrapped.
Publishing its response to the Treasury Committee’s report on household finances, the government said the LISA “encourages the next generation to get into the habit of saving”, pointing out that it helps them save for a house and later life simultaneously.
In July this year, the Treasury Committee said its inquiry had received strong criticism of the LISA over its "complexity, its perverse incentives, its lack of complementarity with the pensions saving landscape and its apparent lack of popularity with the industry and pension savers".
However, in its defence of the LISA, the government said the Committee’s investigation did not take evidence from any of the providers of the LISA. Currently 19 providers offer the product and there are over 190,000 open accounts, on which over £170m has been paid out to date in bonuses, the government revealed.
“These numbers - which are likely to increase - demonstrate that people welcome the flexibility of the Lifetime ISA to save. This is in keeping with the government’s desire to offer people greater choice and freedom in how they save.
"The government remains committed to supporting savers of all income levels and at all stages of life for a range of aims, such as saving towards the purchase of a first home, for a rainy day, or for retirement,” the government said.
The government added that it has worked closely with the FCA and LISA providers to ensure that their customers are aware of the implications in financial terms of making a chargeable withdrawal.
In response, Treasury Committee, chair Nicky Morgan said: “The committee…expressed concern about the complexity and perverse incentives of the Lifetime ISA. It is disappointing, therefore, that the government ignored the committee’s call for the Lifetime ISA to be abolished, and will press on without reform.”