I SAVED FOR NINE YEARS BUT LIFETIME ISA RULES MEANT I LOST OUT ON £11K

Ben Abensur saved diligently for almost nine years so he could reach his goal of homeownership in London.

The 30-year-old, who was born and bred in the capital, finally purchased the three-bed house he now calls home in Mitcham in January this year.

But the buying process was made “much more complicated” because of Lifetime ISA (LISA) restrictions, which meant he ended up with a smaller deposit, a higher interest rate and had to rely on family help.

Speaking to The i Paper, the communications worker said: “I opened my LISA back in 2016 with Skipton, paying in the full £4,000 allowance most years and getting the 25 per cent government bonus.

“At the time, it felt like a no-brainer, especially as a 22-year-old just back from travelling, fresh out of uni, and working in hospitality. It seemed like a great way to actually get a foot on the property ladder in London.”

At first, Mr Absensur and his partner were looking at flats in south London, in places like Tooting, Brixton and Clapham, but realised they could get more for their money if they went a little further out.

He said: “We completed on 30 January at £552,000. Honestly, Mitcham wasn’t even on our radar at first, but as soon as we saw the house and explored the area, we were sold.

“Mitcham has this unique charm, walking around feels like stepping back into a 1960s or 70s village, with beautiful green spaces, a proper sense of community, and a real mix of cultures.

“There’s a huge common right on our doorstep, so it feels like you’re in the countryside, but you’re still in Zone 3 and incredibly well-connected.”

Although, he is happy and settled now, Mr Absensur feels cheated due to the restrictions that come with the savings vehicle.

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Anyone under 40 can open a LISA to either help save towards retirement or buy a first home. You can put in up to £4,000 a year and the government will top it up by 25 per cent.

But funds can only be withdrawn penalty-free if the value of the home you are buying is less than £450,000. Anything over this amount incurs a 25 per cent withdrawal charge, which means you could get back less than you put in.

Mr Abensur said he was “furious” when he found out about the £450,000 limit, adding that he felt “completely misled”.

By the time he was ready to buy with his long-term partner, he had saved around £32,000 – an amount that rose to £40,000 when counting the government bonus.

However, this fell to £29,000 overall as a result of accessing the funds without buying a qualifying property – a drop of around £2,000 he had personally saved into the ISA and inclusive of the 25 per cent withdrawal fee.

He explained: “I’d been diligently saving, thinking I was doing the right thing, only to be told that we couldn’t actually use the money for our home.

“The £450,000 limit hasn’t changed since 2017, even though London house prices have shot up, and there’s barely any clear information warning you about this unless you go hunting through the small print.

“The penalty is brutal – you don’t just lose the government bonus, you lose 25 per cent of your total savings plus interest, so you actually end up with less than you put in.”

He said that even the staff at Skipton were “appalled” and said the rules “desperately” need updating.

The money they lost was meant for legal fees and stamp duty, he said. Instead, he had to borrow money from his grandparent’s business, which he is now paying back at £400 a month.

In the UK, 6 per cent of eligible adults have a LISA, with about 1.3 million accounts still open, according to the most recent figures.

MPs on the Treasury Committee have been gathering evidence on whether the product is still fit for purpose in recent months.

In a new report, the committee said the LISA’s dual purpose to help people save for both the short- and long-term “makes it more likely consumers will choose unsuitable investment strategies”.

Mr Abensur was lucky that the buying process was not delayed because of these complications. He now says that he “regrets” using a LISA.

He added: “The interest wasn’t any better than a normal savings account, and the restrictions ended up making things much harder.

“We ended up with a smaller deposit, a higher mortgage rate, and had to rely on family help. We’re hoping to remortgage soon to get a better rate and finally start paying it down properly.”

2025-06-30T15:49:04Z