Rachel Reeves, Lifetime ISA is broken – please fix it

SSix months ago, I lost my £1,462.30 WealthNo government money, no bonuses I was never entitled to. My Wealth.

money that grew from my own investmentAnd the one I was counting on to buy my first home. And it’s all because I opened one lifetime isa (LISA) When I was 21 years old.

when you Take a quick look at the productIt looks like a divine gift. This is a tax-free savings account for people aged 18-39. Put away £4,000 a year, get a 25 per cent government bonus, then invest or save it for your first home.

I thought I found a cheat code.

Net

So I maxed it out. At 21 I invested £4,000, then the same amount at 22 and 23. That’s £12,000 of my money, plus a £3,000 government bonus, invested and growing. When I turned 28 and went to buy my first thing PropertyMy pot had increased to £17,849.19.

You might be wondering why I stopped at the age of 24-28. Well, at 24 I got engaged and we started looking at properties in London.

And then reality slapped me in the face.

The Lifetime ISA has an asset limit of £450,000. You can use it only if you are a first-time buyer and the property value is within that range. Anything above that, you can withdraw your money, But with 25 percent penaltyYou would think that’s fair, right? Not in London.

I stopped contributing at the age of 23 because I realized the trap I had fallen into. The product that was supposed to help me buy my first house ended up punishing me for wanting to buy my first house.

Mathematic

Here’s what happens when you take out a LISA for anything other than your first home worth less than £450,000, or retirement at 60: You pay a 25 per cent penalty on the total pot. “Okay,” you might think; :They give you 25 percent, they take 25 percent. A fair is a fair, right?”

Wrong.

I put in £12,000. I am getting £13,386.89 back. Sounds like a benefit, right? But here’s what they don’t tell you: my investment grew by £2,849.19. he is My Development. My risk. My return.

The fine not only takes away the £3,000 government bonus, it also takes away £1,462.30 of my own money.

Because the 25 percent fee applies to the entire withdrawal, it takes back part of the bonus and your own share – effectively a 6.25 percent loss on your money.

That’s money that can go toward deposits. That money will still be mine if I put it in an ordinary Stocks and Shares ISA.

Limit

The £450,000 limit was set in 2017, when the Lifetime ISA was launched. Do you know what a house worth £450,000 would be worth in 2017 with price inflation? Approximately £600,000.

But the product did not move. A plan meant to help me has left me in trouble.

And it’s not just London. The average first-time buyer is now closer to mid-30s than 20s, with likely couples with children looking for family homes, not singles buying starter flats.

Good luck finding one of those priced under £450,000 in most of the south of England.

Prayer

Dear Rachel ReevesAutumn budget is coming. Lifetime ISAs have been frozen since 2017. They are no longer helping young people get onto the property ladder, they are punishing them.

That £1,462.30 bothers me. Whenever I look at my new place, I think: There could have been better floors, a nicer sofa – anything.

what should happen

1. Retrospect asset limits

Don’t increase it in line with house price inflation starting today, roll it back to 2017 when the product launches, changing the limit to £600,000 immediately. The property someone had their eye on in 2017 should still be affordable today with their Lifetime ISA. That’s the whole point of the product.

2. Eliminate penalty on development

Withdraw government bonus if one does not meet the criteria. This is appropriate. But don’t take people’s own investment returns. That’s their money. If someone puts in £4,000 and with the bonus it increases to £5,000, they should get at least £4,000 back if they do not use it for the intended purposes. £3,750 no.

3. Increase the limit with house price inflation

Once the limit is refreshed to £600,000, update the decision which means the limit increases in line with the average house price figures. Don’t just fix the problem today, instead it will make the same problem worse later.

Instead, it simply went away because I did what the government told me to do to get on the property ladder.

Now over to you. If you have a Lifetime ISA, check it now. Check when you opened it, check what you thought you would buy at that time, and check what that asset is worth today.

I am 28 years old. I opened my account at the age of 21. Seven years later, I took it back and paid the price for changing my status. That £1,462.30? I needed this six months ago. I still think about it. And I am one of those lucky people who can afford to buy anything.

So, Rachel Reeves, I’m asking: Fix it right now. Stop penalizing potential homeowners who are getting younger and younger every year. Especially because they did everything right.

When investing, your capital is at risk and you may get back less than you invested. Past performance does not guarantee future results.