£244m missed in LISA bonuses last year

An estimated £243.9m was lost in Government bonuses from Lifetime ISAs (LISAs) last year, new research from Moneybox has indicated.

The savings and investment app revealed that 56,100 people bought their first home using a LISA in 2022/2023, but with 300,000 recorded first-time buyers purchasing a home in this period, up to 243,900 more could have missed out on the Government bonus.

The LISA offers a 25% bonus on savings made up to £4,000 each tax year, allowing savers to benefit from as much as £1,000 extra each year from the Government.

According to Generation Rent, saving a first home deposit now takes 10 years on average. However, for anyone saving with a LISA, if they save the full £4,000 each tax year during that period, they could save £40,000 and gain a boost of £10,000 through the Government bonus.

Moneybox has estimated that more than 18 million people in the UK are currently eligible to open a Lifetime ISA.

“Saving the money required for a deposit continues to be one of the biggest hurdles many face on the journey to buying a home,” commented head of personal finance at Moneybox, Brian Byrnes. “The LISA has been a fantastic helping hand for savers trying to get a deposit together, and perhaps more importantly, it has instilled healthy saving and investing habits that stay with people for life.

“An entire generation of first-time buyers have achieved their dreams of home ownership, with more than 170,000 homes purchased since the product was first introduced in 2017.

“However, with more than 18 million Brits eligible to open a Lifetime ISA, it is clear that the true opportunity and benefits of this product are yet to be realised at scale.”

Byrnes added: “Since the LISA was first introduced, the UK has endured a global pandemic, soaring inflation, interest rates hikes and a cost-of-living crisis. And, while the government penalty has helped encourage people to commit to their savings goals, greater flexibility is needed.

“Introducing a penalty-free annual ‘emergency withdrawal allowance’ so savers are not penalised if they need their money in an emergency, could provide greater reassurance to those in need.”

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