16 September 2026
Lifetime ISA
HMRC's latest Annual Savings Statistics show both why the Lifetime ISA has endured and why reform has become necessary. A record 99,750 people used a Lifetime ISA to purchase their first home in 2025-26, withdrawing more than £1.5 billion towards property purchases. That does demonstrate there remains strong demand for products that help aspiring homeowners build a deposit and take their first step onto the property ladder.
"But that is balanced with 154,100 people making unauthorised withdrawals during the same period, triggering almost £119 million in withdrawal charges. Over 50,000 more people paid a penalty to access their money than successfully used the product to buy a home, which does seem like a failure of the product. The average unauthorised withdrawal was just £3,088 suggesting many of these are not people emptying large accounts, but savers who started putting money aside for a home before finding their circumstances had changed and now need access to relatively modest amounts of their own savings.
"In little more than a decade, prospective homeowners have been asked to navigate the Help to Buy ISA, the Lifetime ISA and now the proposed First Time Buyer ISA. During that time, affordability pressures have intensified while the rules governing these products have often struggled to keep pace. The Lifetime ISA attempted to serve two very different purposes by helping people save for both a property purchase and retirement, and that complexity has often created confusion and undermined confidence and its good that reform is on its way.
"As the government develops the First Time Buyer ISA, the lesson from these figures is not that targeted incentives fail. Nearly 100,000 successful house purchases in a single year demonstrates they can be highly effective. But any successor product needs to combine those incentives with greater simplicity and flexibility. The principle of adding government bonuses as contributions are made should be retained, but the punitive withdrawal penalty should not be repeated. If circumstances change, the government may reasonably recover any bonus paid, but savers should not lose part of their own money in the process.
Stocks and Shares and Cash ISAs
"The wider ISA figures also show there are encouraging signs that more people may be beginning to take their first steps into investing. Stocks and Shares ISA subscriptions increased by almost 20% over the year and the number of investment accounts subscribed to rose significantly.
"However, the dominant story remains the extraordinary amount of money flowing into cash. Cash ISA subscriptions increased by £26.1 billion over the year compared with £6.1 billion for Stocks and Shares ISAs, taking the total flowing into cash to almost £96 billion in a single year.
"For decades, we have built a culture that encourages people to save, but not necessarily to invest. While cash has an important role for emergency funds and short-term goals, too many people miss out on the long-term wealth creation that investing can provide. That creates an interesting backdrop to the forthcoming reduction in the Cash ISA allowance to £12,000 for under-65s from April 2027. These figures demonstrate why the government wants to encourage greater participation in investing, but they also highlight the scale of the challenge. Britain's preference for cash remains deeply embedded and an investment culture is unlikely to be created by simply cutting the cash ISA limit.
"If we want more people to become confident investors, it starts with education, the creation of new ways of helping people like targeted support and a stable policy environment. Building an investing culture takes decades and requires clear and consistent policy, trusted products and confidence that the rules will not be continually rewritten. If we want more people to put their money to work over the long term, they need confidence their plans are not going to be upended at each successive Budget."
