Lifetime Isas must be reformed, say former pension ministers as savers end up with less than they invested

A government scheme to help first-time buyers save for a house deposit should be axed or reformed because it is leaving customers worse off, two former pensions ministers have

said. Penalties for withdrawing funds from a Lifetime Isa (Lisa) should be scrapped and the £450,000 cap on qualifying house purchases extended to stop savers being

punished, it has been claimed. The scheme gives savers a 25 per cent bonus on up to £4,000 put away each month. The money can be used to either buy a first home worth

up to £450,000 or for retirement when the account holder turns 60. Savers can put money away into their 40s provided they opened an account between ages 18 to 39. If savers

withdraw their money for any other reason, including if a house exceeds the price cap, they lose the 25 per cent bonus and incur a fee of 6.75 per cent. Baroness Ros Altmann

said she had raised concern over the “dangerous” scheme which  leaves some savers “stuck” since it was first introduced in 2017. The former Pensions Minister said the price

cap of £450,000 is “not sufficient” for many homes in the south of England. “I’d call for the product to be axed or at the very least the government should rethink the way

the product operates”, she told the Telegraph. “If your first home qualifies it’s fine, but if it doesn’t you are worse off and end up getting less.” She said “I’m

disappointed people have been lured into this product without knowing the full facts “When the government tries to prescribe too many rules and constraints… savers get

misled and lose out and then we have another scandal.”