Why lifetime ISA’s are a gimmick

Much of the talk in the press will focus on so called Lifetime ISA’s.

You can read the attached article on what they are but in short you can pay in to a savings account of up to £4000 per year and the Government at the end of each year will pay out an extra 25% on whatever you have saved. This can be used to buy a first time house or you can withdraw it later in life to top up your pension. You can open an account at age 18 and the Government will pay out up until your 50th birthday.

Sounds good and the press will be focusing on this in the papers.

However this is one of those policies that looks good but is of little substance. The Government will hope that the people don’t get suddenly savvy with their money and save en mass. If everyone did this then they will be paying out far more than they ever envisaged and as such will have incorrectly costed how much this scheme will set them back.

They are relying on the obvious fact that there will be a minimal uptake, after all, if it was that easy to save then the chances are everyone would be snapping the Governments hands off for this scheme.

The Government use the example of someone saving £200 a month for 5 years. How many people do you know that has a spare £200 a month to put into savings? If someone does have £200 spare per month then the chances are the only use they will get out of this will be the pension aspect, they will likely have already owned their own home or will be wanting to buy one soon, not wait for 5 years to save up enough money.

This is not an option for the wealthy and it’s not meant to be. The unemployed and the working poor won’t be able to afford it so it leaves a big question as to how many people will find this of use.

Yes there are people who save up for their first house but the cost of a house is astronomical and perhaps this will be of some use to those people.

As for the pension aspect…there is already the state pension, there are already private pensions and this will just be another option to save. No great earth shattering changes but again, the Government will have to hope that everyone doesn’t suddenly decide to take them up on their offer, but this still assumes that you have a good surplus of money to save and in a time of stagnating wages and a high cost of living and a million zero hours contracts it’s the poor who lose out again. Unable to save, unable to take advantage of such schemes. Not much the Government can do about that but they know this will yet again benefit the more wealthy or higher paid workers more than anyone.

A middle income vote earner perhaps, but of little consequence to most people.

It looks and sounds good but it’s really not worth the paper the budget was written on.

Full explanation on what a lifetime ISA is.


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