Lisas limp on, but savers are missing out

Lifetime individual saving accounts have hardly been a roaring success. In the 2017-2018 tax year, the average contribution was £3,114 per account, £400 lower than expected.

926_MW_P21_Pensions-Box

168343712

sturti

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).

Recommended

What Bulb Energy’s collapse means for you
Personal finance

What Bulb Energy’s collapse means for you

Bulb Energy – Britain’s seventh largest energy supplier with 1.7 million customers – has become the biggest casualty of the energy crisis. Saloni Sard…
25 Nov 2021
Is it time to remortgage your home?
Mortgages

Is it time to remortgage your home?

Banks are already starting to prepare for higher interest rates, says Alex Rankine. Should you, too?
23 Nov 2021
Should you take out private health insurance?
Personal finance

Should you take out private health insurance?

As the NHS struggles, more people are paying for private health insurance. But is it worth it?
16 Nov 2021
The Budget brought a short-term reprieve for investors
Budget

The Budget brought a short-term reprieve for investors

The Budget spared investors for now – so make sure you use up all your your allowances.
5 Nov 2021

Most Popular

Don’t worry about the global population explosion – it’s unlikely to happen
Investment strategy

Don’t worry about the global population explosion – it’s unlikely to happen

One of the many things we are taught to worry about is the fast-rising global population. But in fact, says Merryn Somerset Webb, the opposite is tru…
15 Nov 2021
Inflation forecasts mean interest rates should be on the rise – so why aren’t they?
Investment strategy

Inflation forecasts mean interest rates should be on the rise – so why aren’t they?

With inflation forecast to hit 5% next year, we might expect interest rates to be rising, says Merryn Somerset Webb. But central banks are holding off…
8 Nov 2021
Four of the best new investment trust listings
Investment trusts

Four of the best new investment trust listings

Diversify your portfolio and benefit from rising dividends with these four new investment trusts coming to the market soon.
15 Nov 2021