The Treasury Committee has launched a review into the future of the Lifetime ISA.

Lifetime ISAs offer an upfront bonus and tax-free access for a first property purchase and can be attractive to aspiring homeowners.

They can also be used for retirement savers from the age of 60.

The ISA currently has a £450,000 cap on the price of property it can be used to purchase.

Findings from the Treasury Committee inform Government plans, in this case simplifying the ISA system and encouraging investing.

Tom Selby, director of public policy at investment platform AJ Bell, said reforms to the early withdrawal charge and maximum property purchase price could boost the appeal of the Lifetime ISA.

He said: “Lifetime ISAs aren’t perfect and this review from the Treasury Committee is a good opportunity to address some of the issues with their design, as well as exploring where the Lifetime ISA fits in a simplified ISA landscape. AJ Bell has long campaigned for an end to the punitive early withdrawal penalty, instead reverting to the system used during the pandemic when the penalty only matched the original bonus received on the account.

“Likewise, raising the property purchase price limit, which has remained fixed since the Lifetime ISA was introduced, would be an obvious quick win. Analysis from AJ Bell shows that in numerous areas average flats and terraced houses – the sorts of properties that might well appeal to aspiring homeowners – now exceed the £450,000 cap.”

In January 2024 the Labour party pledged to simplify the ISA landscape to make it easier for people to save and invest, and to boost the appeal of ISAs.

Under its simplification plans the Chancellor has already scrapped plans to introduce a British ISA, which had been proposed by the previous Government.

In October British savers put over £20bn into cash savings, but only £1.5bn of this was deposited into ISA accounts according to data from the Bank of England.