The Treasury Select Committee has called on evidence to examine whether the lifetime ISA (LISA) is still an appropriate financial product.

The LISA was introduced in 2016 to provide an alternative method of tax-free saving for retirement.

It also gives people under the age of 40 the opportunity to invest up to £4,000 a year until they are 50 years old. This is then topped up with a 25% bonus from HM Revenue and Customs (HMRC).

Under current rules, individuals are only able to withdraw from the account if they are either buying their first home, are terminally ill with less than a year to live or are aged 60 and over. Withdrawals for any other reason come with a 25% charge.

The Treasury Select Committee stated that it is to examine whether the LISA is "fit for purpose" under its current design, whether it is value for money for the Government, and if it should be reformed to remove the withdrawal penalty.

Other areas of examination include whether the LISA is a suitable pension savings product, if the annual limit should be raised from £4,000 and if it should be reformed in any other way.

Director of public policy at AJ Bell, Tom Selby, commented: "LISAs are an extremely attractive way for people to invest for the future in specific circumstances. For first-time buyers in particular, a LISA is a brilliant way to build up a deposit for a first home and benefit from a sizeable government bonus, as well as enjoying the ability to invest tax free like a conventional ISA.

"LISAs can also offer additional flexibility to those saving for retirement, providing another option alongside a pension. For self-employed savers who do not benefit from automatic enrolment, the LISA can offer an attractive alternative to traditional pension products.

"However, LISAs aren’t perfect and this review from the Treasury Committee is a good opportunity to address some of the issues with their design, as well as exploring where the LISA fits in a simplified ISA landscape."

Moneybox said that it "welcomes the news" on the call for evidence, stating that the LISA's "full opportunity is yet to be realised".

Head of personal finance at Moneybox, Brian Byrnes, added: "Recent HMRC data shows that more than 1.5 million people are currently saving with a LISA across the country. In the last year alone, Moneybox has seen a 34% increase in customers opening a LISA which illustrates a growing demand for a product that has been a true lifeline for many thousands of aspiring first-time buyers in recent years as they did all they could to navigate challenging market conditions.

"Most recently available HMRC data shows that to date, more than 227,600 young people, the length and breadth of the country have been supported to buy their first home far sooner than would have otherwise been possible thanks to the LISA."

The Treasury Select Committee has set a deadline of 4 February for evidence to be submitted.

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