Help to Buy ISA terms changed by government


The Lifetime ISA (LISA), a long-term savings product being launched in April 2017, is having its rules changed to allow first-time buyers to use the government cash bonus for the exchange deposit, rather than waiting until the purchase is completed before paying out, as the Help to Buy ISA does.

Last month, it was controversially revealed that the 25 per cent government cash bonus paid out to Help to Buy ISA holders would not occur until the sale was completed. It had been widely thought that savers taking out a Help to Buy ISA would receive as much as £3,000 to put towards the deposit when buying their first home, but this turned out to be untrue.

The changes made to the LISA therefore look to address these complaints. This scheme was originally announced in March 2016, as a way for people to save towards retirement or their first home. Each year, as much as £4,000 can be saved into the ISA, with the government paying £1 for every £4 saved.

For the first year, the bonus will be paid annually, before being paid monthly from April 2018. Anyone with a LISA will not be able to use any money saved into it for one year after it is opened, and if they want to switch between accounts, it is expected to be a hassle.

However, critics have argued that rather than changing the rules of the Lifetime ISA, the Treasury should have edited the terms of the Help to Buy ISA instead.

“The Treasury has been reluctant to publicly admit this mistake and would have been better just admitting it earlier,” said Conservative MP Jacob Rees-Mogg, who is also a member of the Treasury select committee.

“Now they have tried to fix it by allowing people to transfer into Lifetime ISAs. They should just cut out the middle step and amend the Help to Buy ISA.”

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