Lisas limp on, but savers are missing out

Lifetime individual saving accounts (Lisa) have hardly been a roaring success. In the 2017-2018 tax year, 166,000 Lisas were opened, according to data from HM Revenue & Customs. This is well down on its forecast of 220,000. In addition, the average contribution was £3,114 per account, £400 lower than expected.

The Lisa has an annual investment cap of £4,000, which you can invest in cash or shares, and the government will top up your annualcontributions with a 25% bonus up to £1,000 a year. The money must then be used to fund the purchase of a first home, or you have to wait until age 60 to cash it in, effectively turning the Lisa into a pension-planning vehicle.

The scheme's dual purpose appears to be hampering the marketing efforts of providers, who aren't sure which audience to appeal to. But if you've used your private pension savings allowance, or you're simply looking for diversity in your financial planning, Lisas can make sense. An 18-year-old saver opening a Lisa and then making full use of their contribution allowances until age 50 would qualify for £33,000 of bonuses, plus tax-free income and profits. That might be an extreme example, but all the same, too few pension savers are taking up this offer of free money. Just note the small print: Lisa investments count against your annual Isa allowance of £20,000 and you must be under 40 to open one (though you can continue investing until you're 50).