Lifetime ISA

[Dave1987]

My issue with the product is there is no limit to who can access it, meaning the wealthiest will gain the biggest benefit. I don't believe in taxing people till the pips squeak but not I do I believe in giving rich people £40,000 tax free from Treasury coffers. I'd have less of an issue if the product was only available to people who have no savings, but it's available to billionaires who, quite frankly, shouldn't be getting state handouts.

What the government should have done is increased returns through NS&I bonds, which would have had the bonus of cutting the national debt.
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As for disability numbers dropping when the rules changed, this was the specific intention of the rules. One of the changes meant you don't get mobility benefits if you can use a manual wheelchair- according to this government, a bloke with no legs isn't disabled if he has good biceps.

It's also worth pointing out that about 65% of benefit entitlement decisions are shown to be wrong on appeal, so the government have (rather than sort out the decision making) simply restricted rights to appeal.

Well it's only available to use straight away with the purchase of a first home. Everyone one else it's only available at 60 so not as if anyone can make a quick buck out of it.

With regards to your benefits appeals at least under the coalition and this current Govt there is a system in place to check whether a person is eligible for disability benefits whereas Labour were happy to payout to anyone without any checks.

 

[radamfi]

I don't have a problem with saving, indeed I'm an aggressive saver, but this scheme, just like Help to Buy, simply hypes property prices even more.

 

[Darren R]

My issue with the product is there is no limit to who can access it, meaning the wealthiest will gain the biggest benefit. I don't believe in taxing people till the pips squeak but not I do I believe in giving rich people £40,000 tax free from Treasury coffers. I'd have less of an issue if the product was only available to people who have no savings, but it's available to billionaires who, quite frankly, shouldn't be getting state handouts.

Whilst I don't disagree with your sentiments, I don't think we need worry too much about billionaires taking advantage of the scheme. Under the current provisions, if someone opened a Lifetime ISA as soon as they left school and saved the maximum £4,000 per annum until the age of 60, the Treasury would contribute a total of £32,000 - against £168,000 put aside by the account holder. (The bonus will only be paid by the government until the account holder reaches the age of 50.)

It is intended to be an attractive and simple alternative to a pension scheme for young people at the start of their careers, and, as such, has much to commend it - although the rate of return drops as the amount saved each year decreases or if the account is opened later in life. But your average billionaire-under-40 has much more attractive tax-efficent () options available to him!

To get around the issue of higher earners benefiting from Lifetime ISAs, possibly those who pay Income Tax at the Additional Rate (45%) could be excluded, in much the same way that they will be ineligible for the Personal Savings Allowance from April 6th this year. However, this would make the scheme bureaucratic and introduce complexities to opening a Lifetime ISA - precisely what the Chancellor is trying to avoid.

A Lib Dem, who was in the Treasury under the Coalition government, has warned people against using the Lifetime ISA over paying in to a work place pension scheme.

Would that be former Lib Dem Pensions Minister Steve Webb? Would that be the same Steve Webb who walked out of government and in to a job with Royal London - who just happen to be a major provider of (amongst other things) pensions?

 

[northwichcat]

Would that be former Lib Dem Pensions Minister Steve Webb? Would that be the same Steve Webb who walked out of government and in to a job with Royal London - who just happen to be a major provider of (amongst other things) pensions?

Can't remember what his name was he appeared briefly on the news last week.

 

[Busaholic]

Whilst I don't disagree with your sentiments, I don't think we need worry too much about billionaires taking advantage of the scheme. Under the current provisions, if someone opened a Lifetime ISA as soon as they left school and saved the maximum £4,000 per annum until the age of 60, the Treasury would contribute a total of £32,000 - against £168,000 put aside by the account holder. (The bonus will only be paid by the government until the account holder reaches the age of 50.)

It is intended to be an attractive and simple alternative to a pension scheme for young people at the start of their careers, and, as such, has much to commend it - although the rate of return drops as the amount saved each year decreases or if the account is opened later in life. But your average billionaire-under-40 has much more attractive tax-efficent () options available to him!

To get around the issue of higher earners benefiting from Lifetime ISAs, possibly those who pay Income Tax at the Additional Rate (45%) could be excluded, in much the same way that they will be ineligible for the Personal Savings Allowance from April 6th this year. However, this would make the scheme bureaucratic and introduce complexities to opening a Lifetime ISA - precisely what the Chancellor is trying to avoid.




Would that be former Lib Dem Pensions Minister Steve Webb? Would that be the same Steve Webb who walked out of government and in to a job with Royal London - who just happen to be a major provider of (amongst other things) pensions?

If it was a LibDem Treasury minister then it is more likely to have been Danny Alexander, who was Chief Secretary to the Treasury (who appears to have sunk without trace in the same way as he rose without trace) or David Laws, a man with a book to sell, so I take it to have been the latter. How that man avoided prosecution over the expenses scandal is a separate scandal in itself!

 

[Steveman]

If it was a LibDem Treasury minister then it is more likely to have been Danny Alexander, who was Chief Secretary to the Treasury (who appears to have sunk without trace in the same way as he rose without trace) or David Laws, a man with a book to sell, so I take it to have been the latter. How that man avoided prosecution over the expenses scandal is a separate scandal in itself!

Sir Danny Alexander has not really done bad at all as he's now Vice President of AIIB (Asian Infrastructure Investment Bank) on a huge salary.

 

[me123]

I've already alluded to the fact (in the main Budget thread) that I think the government should be doing more to help those who are unable to save, before they support those of us who can afford to save £4000 per annum. However, I think it is good to incentivise saving money for retirement, and I think it is good to see the option of saving for a deposit on a first home - I think it's a broadly good way of getting people onto the property ladder. The money the government contribute is going to either support people in their retirement or go towards a first property - it's not going to be wasted on holidays, flashy cars and things like that. It can't be.

Of course I'll be using this. I'd be stupid not to. It's brilliant for someone like me who is trying to save towards a deposit, and it will take a fantastic contribution to my pension (although I'm at least 40 years away from retirement!). I maintain that the government's priorities are skewed, but this is something that will benefit a lot of people and will benefit the country as a whole.

 

[Starmill]

Given how depressed wages are, how relatively difficult it remains to get a job - even a low-paid one, the significant underemployment in the economy and the fact that the new minimum wage won't be up to the level reccomended by the Living Wage Foundation, I really don't see how some sort of middle-class savings incentive is helpful to me. Do something about the above problems please GO and maybe you can win back some credit. As it is this policy has no economic rationale and doesn't do a jot to help the low-paid. Typically Osborne.

 

[Busaholic]

Sir Danny Alexander has not really done bad at all as he's now Vice President of AIIB (Asian Infrastructure Investment Bank) on a huge salary.

I'm sure that's all justified by his huge talent and intellect, and not an act of cronyism.

 

[me123]

I of course agree that the low paid have been royally screwed by this budget. But do recall that the government here are giving the 25% on savings up to £4000pa. This means that you can invest as little as you like and still benefit from the bonus. Even £100 a year earns you a bonus of £25 each year plus annual interest until the ISA matures, which is much better than pretty much anything else I can see on the market.

In an indirect manner, the ISA will stimulate the property market and make it easier for first time buyers, which could increase the demand for new build homes and as such provide jobs for the whole spectrum of people involved in the construction industry.Remember, as well, that the money can only be used for retirement and first time property purchases. This will not go to buy a yacht or a holiday or a Mazarati.

Whilst I would agree that the Budget as a whole does little to nothing to support the most vulnerable in our society, I think that quite a lot of people can benefit from this. It's not going to help the most vulnerable, but everyone looking at long term saving can benefit. Of course, those who can afford £4k pa will benefit the most. But I think that, whilst this won't help the most vulnerable, it will help people in the lower pay brackets too.

 

[Starmill]

I understand the point made by me123 very well. Clearly there's a logical process here and a specific benefit that you could achieve if you jump through the relevant hoops. From that point of view good things can accrue to people who use it, even the very low-paid. This is all true. But my objection is on the grounds of opportunity cost: if the Government has the money for this kind of thing why do we then lack any policies to do something about the problems I outlined. Why the "deeply unfair" (to use the words of Ian Duncan Smith) welfare cuts, but money for this? The answer is because Mr Osborne thinks that something which involves the notion of 'saving for the future' and what he wants us to believe is his fiscal prudence will appeal to would-be Conservative voters. If they engage in this ISA and benefit, even just a little, they might start to see the Conservative party more favourably, even while they restructure other things in society(the NHS, Schools etc.) to cost the Treasury less at any social cost. To me, this policy says I should struggle hard in a mismanaged economy to live up to the ideals of a man like Mr Osborne and save what meagre amounts I can, while the Government tries to convince me to vote for them and imposes an ideological framework on the economy. This is a poor use of precious Government funds, intended to keep some conservatives happy and create new ones in the future while others continue to suffer. A similar template applies to Help to Buy and a not that dissimilar one to the Sugar Tax.

 

[me123]

But my objection is on the grounds of opportunity cost: if the Government has the money for this kind of thing why do we then lack any policies to do something about the problems I outlined. Why the "deeply unfair" (to use the words of Ian Duncan Smith) welfare cuts, but money for this? The answer is because Mr Osborne thinks that something which involves the notion of 'saving for the future' and what he wants us to believe is his fiscal prudence will appeal to would-be Conservative voters. If they engage in this ISA and benefit, even just a little, they might start to see the Conservative party more favourably, even while they restructure other things in society(the NHS, Schools etc.) to cost the Treasury less at any social cost. To me, this policy says I should struggle hard in a mismanaged economy to live up to the ideals of a man like Mr Osborne and save what meagre amounts I can, while the Government tries to convince me to vote for them and imposes an ideological framework on the economy. This is a poor use of precious Government funds, intended to keep some conservatives happy and create new ones in the future while others continue to suffer.

I agree. The government should be spending money on the less fortunate. The most vulnerable in society are unlikely to ever benefit from this scheme.

However, I think it should be pointed out to people of all backgrounds, especially those less well off who can put a bit of money aside, that this is something that may benefit them. This isn't simply something that those like myself can afford, and it's not simply something that the super rich will take advantage of. It is a scheme that can benefit even meagre savers. Even those who may not ultimately buy a house, but could perhaps have a few thousand pounds put aside over many years to supplement their pension.

Not everyone will be a homeowner, but most of us will live to retirement. In this way, it's much fairer than the Help-to-Buy ISA. Even if you don't buy, you will have access to the money with the bonus to help you in your older years.

 

[radamfi]

It's brilliant for someone like me who is trying to save towards a deposit, and it will take a fantastic contribution to my pension (although I'm at least 40 years away from retirement!). I maintain that the government's priorities are skewed, but this is something that will benefit a lot of people and will benefit the country as a whole.

The main barrier to home buying is the high prices, and this scheme will only inflate them further. From the budget thread I can see that you are around the higher rate threshold. For someone earning that kind of money home buying should be straight-forward, but the fact that someone in your position is "trying to save for a deposit" says to me that prices are too high. Even in Scotland.

I bought the flat I'm living in now, 30 miles from London, one year after starting work, earning £13,500 a year. Even in 1997 that wasn't a high wage and a long way from the higher rate threshold. I can "afford" to upgrade to a much bigger house now, but I refuse to pay the silly prices. I won't upgrade until prices fall to sensible levels.

I do support the generous ISA allowances. I have been investing the maximum amount in ISAs since they started. Regular ISAs help to incentivise people to invest in things other than property, but the Lifetime ISA actively promotes property ownership.

 

[me123]

The main barrier to home buying is the high prices, and this scheme will only inflate them further. From the budget thread I can see that you are around the higher rate threshold. For someone earning that kind of money home buying should be straight-forward, but the fact that someone in your position is "trying to save for a deposit" says to me that prices are too high. Even in Scotland.

Property prices may be very high, but I struggle to imagine a world where people can have a deposit without saving. Even assuming a property valued at £100,000 (a modest amount I would say), a 10% deposit requires £10,000 plus various costs associated with the purchase. For a 5% deposit, that's £5,000 plus the various fees. I struggle to imagine that anyone earning under six figure sums can make that sort of financial commitment without at least some saving, even if only for a few months.

FWIW, I have saved more than enough for a deposit for a comfortable home in Scotland within two years of working. I can easily afford a two bed flat in a very nice part of Edinburgh, having just done a quick search to confirm that is the case. The barrier to home ownership for me is not the cost - it's simply not practical for me to purchase a house at the moment. If my circumstances were more straightforward - i.e. I could guarantee that I would be living in an area for more than one year, I would have chosen to do so and would have had no trouble in doing so.

 

[radamfi]

Property prices may be very high, but I struggle to imagine a world where people can have a deposit without saving. Even assuming a property valued at £100,000 (a modest amount I would say), a 10% deposit requires £10,000 plus various costs associated with the purchase. For a 5% deposit, that's £5,000 plus the various fees. I struggle to imagine that anyone earning under six figure sums can make that sort of financial commitment without at least some saving, even if only for a few months.

Things have got crazy if we think £100,000 is a modest amount for a house! My flat was £41,000 when I bought it, so a 5% deposit was just over £2,000. It didn't take very long to save that much even on my modest salary at the time. The flat seemed expensive, considering that the house I grew up in near Manchester was worth about £15,000 at the time.

 

[northwichcat]

If it was a LibDem Treasury minister then it is more likely to have been Danny Alexander, who was Chief Secretary to the Treasury (who appears to have sunk without trace in the same way as he rose without trace) or David Laws, a man with a book to sell, so I take it to have been the latter. How that man avoided prosecution over the expenses scandal is a separate scandal in itself!

Not Danny Alexander, it was someone with brown hair and an English accent.