THE Government has confirmed it is sticking with plans to introduce a first-time buyer ISA to help Brits get on the housing ladder.
Former Chancellor Rachel Reeves first announced plans to scrap the current Lifetime ISA (LISA) and bring in a new savings product for first-time buyers in her Autumn Budget last year.
The Treasury has now confirmed to The i paper that new Chancellor John Healey and Prime Minister Andy Burnham are still looking at a “new and improved product”.
The existing LISA pays you a 25% government bonus on up to £4,000 of your savings each year.
It’s aimed at helping first-time buyers get on the ladder, as well as helping people save for retirement.
The new ISA is also expected to pay out a government bonus when you buy your first home.
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But it will have some crucial differences to the LISA, which has been the subject of controversy in recent years.
For starters, there will be no upper age limit for opening or saving into an account – which is good news for older savers.
The LISA only lets you open an account if you’re under 40.
But officials have said they want to raise the age limit as more people are buying homes later in life.
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The new savings account will also remove the dreaded withdrawal fee that has been hitting LISA savers.
If you save into a LISA, you’ll be hit with a 25% fee if you withdraw your cash for any reason other than buying your first home or retiring.
This means you’ll lose your government bonus, but you’ll also be hit with an effective 6.25% charge on your own cash deposits.
A record 129,200 Brits were hit with these fees in the most recent tax year, up from 99,700 the year before.
Experts say the number has been rising partly because the LISA only lets you buy first homes worth £450,000 or less.
In some areas of the country, rising house prices have made it hard for first-time buyers to stick within the limit – leading some no choice but to pull their savings out of the LISA.
A Treasury spokesman told The i: “We recognise that the Lifetime ISA is not working for everyone, particularly when people’s circumstances change.
“That is why we have consulted on a new and improved product, specifically designed to support first-time buyers and without penalty for withdrawals.”
Some key details about the new ISA are still unclear, but the Government launched a consultation on it in June.
Savers are still waiting to find out what the annual savings limit will be, and how much the bonus could be too.
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It’s also not clear how much the price cap on properties could be.
The consultation said this information would be announced “at a future fiscal event”, which could be the Budget on October 28.