Research and analysis

Understanding the use of the Lifetime ISA: qualitative research

Published 22 April 2025

Prepared by Ipsos for HM Revenue and Customs

Amrita Sood, Oliver Gooding (Ipsos)

Research report number: 775

August 2024

The views in this report are the authors’ own and do not necessarily reflect those of HM Revenue and Customs

1. Glossary

This report uses terminology and abbreviations that are explained below.

Term	Definition
Compound interest	The concept of earning interest on both the initial principal amount and any accumulated interest.
Help to Buy ISA	A Help to Buy ISA is a type of cash Individual Savings Account that was introduced by the UK government to help first-time homebuyers save for a property. New Help to Buy ISAs can no longer be opened.
Help to Save	A type of savings account introduced by the UK government. It allows certain people entitled to Working Tax Credit or receiving Universal Credit to get a bonus of 50p for every £1 they save over 4 years.
Index funds	A type of investment fund that aims to replicate the performance of a specific segment of the financial markets.
Individual Savings Account (ISA)	An Individual Savings Account (ISA) is a type of tax-free savings account. Individuals can save or invest a certain amount of money each year without having to pay Income Tax on their savings and dividend income or Capital Gains Tax on the sales of assets that have increased in value. There are different types of ISAs such as cash ISAs and stocks and shares ISAs.
Lifetime ISA (LISA)	A Lifetime ISA is a type of Individual Savings Account launched in April 2017 to help people aged 18 to 40 save for their first home or later life.
Long-term saving habits	For the purposes of this research, long-term saving habits are practices or behaviours individuals put in place to save money or achieve their financial goals over an extended period, such as setting aside a portion of their income towards savings or investments.
Office for Budget Responsibility (OBR)	The Office for Budget Responsibility was created in 2010 to provide independent and authoritative analysis of the UK’s public finances. It is one of a growing number of official independent fiscal watchdogs around the world.
Withdrawal charge	A 25% charge applied where individuals withdraw their money from the LISA for reasons other than house purchase, after the age of 60, or terminal illness.

2. Executive summary

2.1 Introduction

HM Revenue and Customs (HMRC) commissioned Ipsos to undertake qualitative research with those who held a Lifetime Individual Savings Account (LISA) and those who were eligible for an account but did not hold one. The aim of this research was to understand LISA holders’ perceptions and experiences of the account, and to explore non-holders’ attitudes and understanding of the LISA.

The LISA is a type of Individual Savings Account, launched in April 2017, to help people aged 18 to 39 save for their first home or later life. It allows individuals to save up to £4,000 per tax year and receive a 25% bonus from the government on their contributions until they reach the age of 50. Those withdrawing their money from the LISA for reasons other than house purchase, after the age of 60, or terminal illness pay a withdrawal charge of 25%.

Little research has been done into how users perceive and use the scheme. This qualitative research with LISA holders and eligible non-holders was commissioned to fill that gap. In particular, this research aimed to understand whether the LISA is achieving its aims, identify barriers or challenges that LISA holders might face, understand why some of those eligible for a LISA have not opened one, and explore potential areas for improvement.

2.2 Methodology

The research included a total of 50 qualitative in-depth interviews, conducted by Ipsos between July and August 2023, over the telephone or Microsoft Teams with LISA holders and eligible non-holders. They covered the following subgroups:

• LISA holders who had not withdrawn savings from their account (at the time of the interview)
• LISA holders who had withdrawn savings to purchase a house in the last 5 years
• LISA holders who had made an unauthorised withdrawal in the last 5 years
• non-holders who said they could afford to save, were both aware of and eligible to have a LISA but did not have an account (at the time of the interview)

Due to the qualitative method, findings are reflective only of the LISA holders and eligible non-holders who participated in the research. This research provides an indication of the range of views towards and experiences of the LISA. The results are not representative of the wider population of LISA holders or eligible non-holders.

2.3 Key findings

Awareness of LISA

Awareness of the LISA overall was limited for non-holders. Some suggested that involving more recognisable high street banks might help to increase familiarity with the scheme.

Awareness of specific withdrawal conditions for the LISA was relatively low for both LISA holders and non-holders. This had sometimes caused problems further down the line for LISA holders when making house purchases or unauthorised withdrawals.

Motivations of LISA holders and non-holders

LISA holders were primarily attracted by the 25% bonus, which they saw as the best option in the market to grow their savings. They did not expect to withdraw for unplanned reasons. Those who opened the account opportunistically were not always aware of all withdrawal conditions.

Those who opened their LISA for a house purchase tended to have lower incomes, saving over the shorter term for a deposit. Those who opened it for later life tended to be homeowners, on higher incomes, and were typically older.

Non-holders had not opened accounts for several reasons. Lower-income savers were deterred by limited access to their money or a lack of trust in long-term schemes. Those who lacked in-depth knowledge of the LISA prior to the interview and were more affluent were keen to open a LISA, unless they were deterred by the house price cap.

Experiences of the LISA

LISA holders had positive experiences with providers overall in terms of usability and customer service. In some cases, they felt providers could have been more proactive at communicating conditions.

Those who withdrew their money for a house purchase were pleased with achieving their goal, although they felt there was potential to streamline some elements of the process with improved communication.

LISA holders largely felt the scheme had encouraged them to save more. This was particularly the case for those who were less affluent and not already saving the maximum amount permitted by the LISA.

Perspectives on withdrawal

The withdrawal charge was seen as a positive aspect of the LISA by some savers who saw the advantages of money being ‘locked away’.

Those who made unauthorised withdrawals did so due to unforeseen changes in financial circumstances or lack of awareness of the conditions (this excludes those who withdrew strategically during the reduced charge period in 2020 to 21). There were mixed views of the withdrawal charge amongst this group: those unaware of the full conditions tended to think losing part of their savings as well as the bonus was unfair, while others accepted it as an important part of the scheme.

3. Introduction

3.1 Research context

HM Revenue and Customs (HMRC) commissioned Ipsos to undertake qualitative research with individuals who had ever held a Lifetime Individual Savings Account (LISA) and individuals who had not held a LISA but were aware of and eligible to hold one. The aim of this research was to understand LISA holders’ attitudes and experiences of the account, and to explore non-holders’ perceptions and understanding of the LISA.

The LISA is a type of Individual Savings Account, launched in April 2017, to help people in the UK aged 18 to 39 save for their first home or later life. The LISA allows individuals to save up to £4,000 per tax year and receive a 25% bonus from the government on their contributions until they reach the age of 50. Cash, stocks and shares, or a combination of both can be held in a LISA.

Individuals can access money in their LISA, including the bonus, without paying a withdrawal charge, if they are:

• buying their first home after the LISA has been open for 12 months, with the purchase price of the home at £450,000 or less, bought using a mortgage through a solicitor
• aged of 60 or over
• terminally ill, with less than 12 months to live

LISA holders need to pay a 25% withdrawal charge if they withdraw money for any other reason. The withdrawal charge was reduced to 20% from 6 March 2020 until 5 April 2021 in response to the COVID-19 pandemic.

Based on data from the Office for Budget Responsibility (OBR) in 2022 to 23, government bonuses for the LISA cost around £450 million. HMRC also publishes annual savings statistics, including those on LISAs. Despite the benefits of the LISA, there has been limited research on how LISA holders perceive and use the savings account.

3.2 Research aims

The overall aim of this qualitative research was to provide a deeper understanding of the perceptions, experiences, and attitudes towards the LISA.

The specific research objectives were to:

• gain insights into LISA holders’ experiences of the LISA, and how it is being used in practice
• explore ways in which the LISA is achieving its aims of helping first time buyers save for a home and supporting people to save for later life
• identify any barriers or challenges that LISA holders face
• identify LISA holders’ future intentions
• uncover why some of those eligible for a LISA have so far not opened one

3.3 Methodology

Ipsos conducted a total of 50 qualitative in-depth interviews with LISA holders and eligible non-holders between July and August 2023. LISA holders were sampled from data provided by HMRC. Non-holders were recruited by Ipsos from the general population using a free-find recruitment approach.

As there had been no previous research on this topic, an exploratory approach was required. The qualitative methodology was used to generate rich, detailed findings on LISA holders and non-holders’ experiences. Further quantitative research will be required to provide statistically robust findings that are representative of the wider population.

This research comprised 10 to 15 interviews with participants belonging to a LISA subgroup of interest:

• LISA holders who had not withdrawn savings from their account (at the time of the interview)
• LISA holders who had withdrawn savings to make a house purchase in the last 5 years
• LISA holders who had made an unauthorised withdrawal in the last 5 years
• non-holders who said they could afford to save were both aware of and eligible to have a LISA, but did not have an account (at the time of the interview)

Subgroups of interest	Number of interviews	Sample source
LISA holders who had not withdrawn savings from their account	15	HMRC data
LISA holders who had withdrawn savings to purchase a house in the last 5 years	15	HMRC data
LISA holders who had made an unauthorised withdrawal in the last 5 years	10	HMRC data
Non-holders who could afford to save, were both aware of and eligible to have a LISA but did not have an account	10	Free-find

Beyond this, indicative quotas for LISA holders were set by region, age, gender, ethnicity, employment status and income level to ensure a diverse range of experiences could be observed. A table providing a detailed profile of LISA holders interviewed is included in the technical appendix. Ipsos did not include LISA holders who had withdrawn from their LISA in the context of a terminal illness.

For the HMRC-provided sample of LISA holders, Ipsos conducted a sample enhancement process to improve the accuracy of contact details for recruitment. A screening questionnaire was used during recruitment of both LISA holders and non-holders to establish eligibility to participate. This can be found in the technical appendix.

The interviews lasted 45 to 60 minutes and were conducted via telephone or Microsoft Teams. Interviews were structured around two topic guides, one for LISA holders and one for non-holders, developed by Ipsos in collaboration with HMRC. These are also included in the technical appendix.

3.4 How to read this report

The report has been split into different sections based on the aims of the research. These sections cover the financial circumstances of participants, awareness and experience of the LISA, decision making around opening a LISA, perspectives on withdrawal, responses to different hypothetical scenarios relating to charges and bonus levels, and the perceived impact of the LISA on savings.

Due to the qualitative method, findings are reflective only of the LISA holders and non-holders who participated in the research. This research provides an indication of a range of views towards and experiences of the LISA. The results are not representative of the wider population of LISA holders or non-holders.

It is also important to bear in mind that this research was conducted in 2023: research from the Financial Conduct Authority found more adults were struggling financially during this time, in comparison to previous years, due to the cost of living crisis.

Verbatim comments have been included in this report to illustrate and highlight key points and common themes. Where verbatim quotes are used, they have been anonymised and attributed with the following characteristics:

• for LISA holders: whether or not they had withdrawn from their LISA and for what purpose, as well as saver group
• non-holders: saver group

The phrase ‘saver group’ refers to how this research has grouped participants by their financial circumstances and saving habits. These groups include ‘Affluent’, ‘Cushioned’, and ‘Irregular’ savers. More information about these saver groups can be found in the next section of the report.

Please note that 2 or more participants may have the same information in the attributions for their quotes.

4. Financial context

This chapter sets out the way in which participants in the research were grouped in terms of their financial circumstances and savings habits, and how this context informed their perspective on saving in a LISA.

4.1 Saver groups

The research found that LISA holders, as well as non-holders, were not a uniform group. These groups differed in terms of their capacity to save regularly, their income, long-term savings habits, and saving behaviour at the time of interview. These differences between participants informed the development of saving behaviour groups, referred to as saver groups in this report. These groups were identified and defined by Ipsos when analysing the interview findings, and are described in this report. The saver groups are: ‘Affluent Savers’, ‘Cushioned Savers’, and ‘Irregular Savers’.

The defining characteristic behind these groups is how much people saved each month and what informed this decision. Income was found to be the main factor shaping saving behaviour. Those with the lowest incomes often could not spare the money to save, while those with higher incomes could put money aside without needing to moderate their behaviour.

Attitudes to saving also played an important role. Some on higher incomes spent more of their earnings, while those on moderate incomes had managed to build wealth through regularly putting money aside. However, those on lower incomes mostly remained less financially comfortable than those on higher incomes, irrespective of attitudes towards saving.

It is important to note that, although non-holders have also been categorised within these saving behaviour groups, the sample size for non-holders (10) was smaller than for LISA holders (40). This smaller sample size means that the grouping of non-holders in this research should be regarded as indicative only.

Saver groups	Description
Affluent Savers	Those with the highest household income compared to the other groups. This typically included those who had an annual household income of over £100,000. This group tended to have a range of saving and/or investment products.
Cushioned Savers	Those typically with an annual household income of over £35,000 but less than £100,000. This group saved regularly although could not always save the maximum amount that was permitted in the LISA.
Irregular Savers	Those on lower incomes who tended to have limited disposable income. This group had minimal savings or saved infrequently, mainly because of their financial circumstances.

4.2 Affluent Savers

Across all saving behaviour groups, ‘Affluent Savers’ were found to be the group with the highest income of the three, with individuals typically having an annual household income of over £100,000.

Among those in this group who were LISA holders, the LISA was often only one of several savings and investment products they had, including stocks, index funds, or other ISAs. They had a good knowledge of savings and investments. All LISA holders in this group were in paid work, with some employed and others self-employed. This group tended to be property owners, including those who had used their LISA to purchase a first home and those using the LISA to save for later life.

Individuals in this group were often sophisticated in their approach to financial investment. They tended to have a range of savings and investment products to minimise risk and maximise potential return, and were able to put considerable sums into savings at the end of each month due to high incomes. They had typically reached the maximum savings limit of their LISA to maximise the return on their investment.

“I save more than I spend. I’ve been saving since I was 22, putting 16% of my pre-tax income into a pension. I have a stocks and shares ISA, a cash ISA, and £1,000 of cryptocurrency in case it takes off.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

‘Affluent Savers’ who did not hold a LISA were either not ready to take out a LISA or did not feel drawn to doing so, despite their higher income. This is explored in more depth later in the report.

4.3 Cushioned Savers

‘Cushioned Savers’ typically had lower incomes than the ‘Affluent Saver’ group, with their annual household income starting from around £35,000 each year. Many had built a habit of saving consistently over time with a view to accumulate wealth for the future or being able to afford something specific.

Those in this group who held a LISA tended to save into it regularly, but their income often did not allow them to invest the maximum sum permitted. Unlike the ‘Affluent Saver’ group, they tended not to have enough spare income at the end of each month to be able to set aside a significant proportion for saving.

“As soon as I get paid, I save money straight away…I have set up a regular direct debit to my savings account.”

LISA holder who had not withdrawn, ‘Cushioned Saver’

‘Cushioned Savers’ who did not hold a LISA were also typically in the habit of making small but regular savings into various savings accounts. They typically felt they were good at budgeting and managing their money, and those able to save larger amounts showed some interest in taking out a LISA in the future.

4.4 Irregular Savers

‘Irregular Savers’ frequently had lower incomes than the other two groups. They tended to have limited disposable income. Those who did hold a LISA were not consistently contributing to it as they felt their income did not allow them to do so. They opened a LISA either because they felt able to save at the time and were no longer able to, or, especially for younger LISA holders in this group, because they intended to save into it once their financial situation had improved.

“I am not a regular saver now, in the past I was as I was saving for something specific [flat]… Now I try not to spend and save what is left over.”

LISA holder who had withdrawn to purchase a house, ‘Irregular Saver’

‘Irregular Savers’ who did not hold a LISA sometimes attempted to save when they could. Echoing research from the Money and Pensions Service, ‘Irregular Savers’ in this research had typically built up minimal savings in the past and therefore had lower financial resilience. This meant they had a limited financial cushion to cope with unexpected expenses and had to rely on other ways of generating funds to meet these unforeseen costs.

Among both LISA holders and non-holders who were ‘Irregular Savers’, there were those who had not built a long-term savings habit and did not undertake any financial planning. This included those who had gone into debt or found their financial priorities changing after buying a house. This group also included those who had faced recent challenging circumstances which they felt prevented them from saving, such as ill health, lost jobs, relationship break ups, or having children.

“It’s not great at the moment with the high cost of living. I would have to use credit cards for sudden unexpected expenses, or the bank of mum and dad.”

Non-holder, ‘Irregular Saver’

5. Awareness and experience of the LISA

This chapter explores the level of awareness that LISA holders and non-holders had of the LISA, and the experiences that LISA holders had in their interactions with providers during the time their account was active. It also summarises LISA holder and non-holder perceptions of some of the key features of the LISA.

5.1 Awareness of the LISA for LISA holders

Most LISA holders who took part in this research tended to be well-informed about personal finances, and often had multiple sources of information to draw on. They often engaged with information from financial journalists and experts, with Martin Lewis’s emails and his Money Saving Expert website being particularly popular. Some also read financial news from the Financial Times, discussed financial products with friends and family, or sought advice from their bank.

Access to multiple sources of information contributed to their understanding of LISA, and how the features of a LISA compared to other savings products. Younger LISA holders who took part in this research were more likely to mention having heard about the LISA from their parents, while work colleagues were a good source of knowledge for older LISA holders.

“I think it would’ve been my parents that brought it up to me, the government bonus, it was pretty good.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

Some LISA holders who participated in this research had other government savings products, notably a Help to Save account. They had heard about the LISA and Help to Save through the same government channels, including via the HMRC app or at a Job Centre Plus interview, in the context of a discussion about government support with savings.

Although not a common finding, some LISA holders who took part mentioned that they had previously opened a Help to Buy ISA. There was no indication that the distinctions between these savings accounts caused any confusion for these participants, and some were clearly able to compare them directly.

In general, LISA holders in this research displayed good knowledge of the key features of the LISA, including:

• the 25% government bonus for every £1 saved
• the £4,000 cap on deposits each financial year
• restriction on withdrawals until buying a first home or when over 60

“I knew about the government giving a quarter of the money and that you don’t get it if you take it out before buying a house or taking it out for a pension. I did read up about it.”

LISA holder who had withdrawn to purchase a house, ‘Cushioned Saver’

However, they tended to be less knowledgeable about some specific LISA rules and had some misconceptions, including:

• confusion that the 25% withdrawal charge does not just remove the government bonus but also reduces the original amount saved as well
• low awareness of the rule stating that when making a withdrawal to purchase a house, it must be at least 12 months since the first payment into their LISA account was made
• a misperception that the house price cap varies by area and is higher in London and the South East (in fact, the £450,000 cap applies across the UK)
• lack of clarity on the frequency of the bonus payment
• uncertainty about whether the LISA paid compound interest and whether it offered a return on investment that was as good as a regular ISA

“I knew there was a limit on the total amount. There was a cap on spending on a first-time house, cap was higher in London.”

LISA holder who made an authorised withdrawal in the last 5 years, ‘Affluent Saver’

5.2 Awareness of the LISA for non-holders

As might be expected, when compared to LISA holders, non-holders who took part in this research displayed a more limited understanding of the LISA. To some degree, they were also less informed about personal finances in general.

Although there was often broad awareness of the existence of a bonus and of eligibility restrictions, multiple misperceptions surfaced among this group of participants around the rules, requirements, and criteria of LISAs, due to lack of knowledge.

There were misperceptions about:

• a minimum saving requirement or a required savings frequency, such as some non-holders believing that LISA holders had to save monthly
• the exact nature of the bonus on offer, such as those with very low understanding of the LISA believing that the government promised to ‘double your money’
• age restrictions on taking out a LISA, such as some believing it could be taken out up to age 45, or after retirement
• house buying restrictions, including some not aware of the withdrawal conditions for buying a house such as the 12-month minimum rule and the price cap

Non-holders in this research who had heard about LISAs through the Money Saving Expert website, or through an ISA provider, had better knowledge of these features of the LISA. However, the general lack of knowledge and understanding among non-holders included in this research suggests that more comprehensive information dissemination and improved communication about the details of the LISA could be beneficial.

“When I first heard about it, I agreed with the concept of it. It sounds like a normal ISA with a bit more.”

Non-holder, ‘Cushioned Saver’

Some non-holders with higher incomes who took part in this research were aware of all the main conditions of the LISA, and still chose not to use it. For example, having researched it, some had decided not to open a LISA because of the house price cap. More findings on non-holders’ motivations for not opening a LISA can be found in 6.3.

“I think the house price cap shouldn’t matter, the current is £450,000, it shouldn’t matter to the government as long as you’re using it to buy a property.”

Non-holder, ‘Cushioned Saver’

5.3 LISA holders’ experience of the setting up their accounts

Most LISA holders in this research generally had a good experience of setting up and using their LISA. The ‘smooth’ application process they described, facilitated by banks and other providers, meant that the user experience was a positive one. Once the account was open, these LISA holders appreciated their providers’ simple user interface to manage their money, even though there was variation in the providers LISA holders said they used.

“The set up was easy…just download the app…and simple to do…never thought it was difficult.”

LISA holder who had not withdrawn, ‘Cushioned Saver’

“Martin Lewis suggested a few [providers]. I went with [LISA provider], as it’s app based and you can use it on your phone…You don’t have to go into the branch…You can just transfer money from your current account to your LISA account.”

LISA holder who had not withdrawn, ‘Cushioned saver’

LISA holders included in this research tended to report that their provider communicated infrequently with them. However, this did not cause these LISA holders concern, and providers were generally considered to be responsive when needed. LISA holders in this research reported receiving good customer service, and that their providers were helpful and knowledgeable about withdrawal conditions.

While providers generally created a positive experience for LISA holders, there were difficulties reported by some LISA holders in this research who switched from a Help to Buy ISA to a LISA. For example, some felt that their LISA provider could have done more to proactively communicate the conditions and restrictions around withdrawal, particularly the 12-month minimum rule for making a withdrawal. Some also commented that there appeared to be no option to talk to an advisor about the switch, although they did acknowledge that the provider’s webchat function was efficient.

5.4 LISA holders’ views of the key features

LISA bonus

Across LISA holders who participated in this research, the 25% government bonus stood out as the key feature that had attracted them to open a LISA. The bonus was seen as generous in comparison to returns offered by other products. Those who opened the LISA in order to save to buy a home reported that the generosity of the bonus helped them do so.

“I thought that it would be a nice return on whatever I save, if you think about every other pot, [you receive] 1% if you’re lucky … now, granted it’s up to £4000 but it’s still 25%.”

LISA holder who made an authorised withdrawal in the last 5 years, ‘Cushioned Saver’

More affluent LISA holders in this research, who were saving at the maximum level of £4,000 per year, tended to feel that the annual saving cap should be raised, and that it should be kept in line with inflation. This would mean that the bonus they could potentially receive from the government would also increase. Less affluent LISA holders included in this research tended to see the bonus cap as fair.

“It’s great to get £1,000 from the government, [it] is amazing, but it’s a shame that if you have capacity to save more [you can’t].”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

LISA holders interviewed in this research had different reactions to the fact that the bonus was backed by the government, depending on their attitude to the government in general, although most did not have strong views on this. For some, it increased their trust in the product, while others felt that a future government may decide to reduce the bonus.

There were misconceptions among some LISA holders in this research about the frequency of the payments. These LISA holders expressed a strong desire for the government-backed bonus to be paid monthly, making saving more tangible and trustworthy.

“You can see the real time value and [if it wasn’t paid until the point of withdrawal] it would affect the level of trust a little bit, because if it wasn’t paid until the end, you’d have to hope it was calculated correctly over a long period of time.”

LISA holder who made an authorised withdrawal in the last 5 years, ‘Cushioned Saver’

House buying requirements

Not all LISA holders who took part in this research could name the specific house buying requirements beyond the house price cap. Those who had withdrawn to make a house purchase had more knowledge. In general, the house buying requirements were not seen as excessively restrictive when LISA holders were made aware of them in the interview.

There was some concern surrounding the £450,000 house price cap, particularly amongst ‘Affluent Savers’ and ‘Cushioned Savers’ in this research. This was most often found among LISA holders living in high cost areas like London and the South East who sometimes viewed the cap as a limiting factor in the interviews.

There was also low awareness that the LISA account should be open for at least 12 months before withdrawal to buy a house. Some first time buyers in this research had not been able to make use of their LISA for buying a house due to this rule and felt it should be reconsidered. Others who had used the LISA to purchase a house weren’t fully aware of the rule when they had initially opened the account, although ultimately it had not limited their ability to purchase a house.

“In 2019, the cap was less of an issue, but when I bought, house prices had gone up in 3 years. I was looking at some shared ownership properties that were over 450k. LISA takes account of the whole value of the house. So that discounted some of the properties.”

LISA holder who had withdrawn to purchase a house, ‘Irregular Saver’

In contrast, the rules around being a first-time buyer, needing to use a solicitor or conveyancer, and buying with a mortgage were all accepted as logical by LISA holders in this research to ensure the LISA was used by genuine homebuyers.

Withdrawal conditions

All LISA holders interviewed knew that there were some restrictions on withdrawals. However, even those who were highly financially literate tended to have overlooked the fact that the withdrawal charge penalises the saver beyond the level of bonus on the amount originally invested. Very few LISA holders in this research understood the withdrawal charge in full prior to the interview.

LISA holders including in this research, who were actively paying into their account, were generally confident in their ability to avoid having to encounter withdrawal charges via an unauthorised withdrawal. They often felt positive about the withdrawal charge in that it was acting as a useful deterrent by preventing them from taking the money out to use for a less important purpose.

“It’s an incentive for doing it [saving for a house], it’s a model to save … I was not working for a few months, so if [there were] no penalties and times were tight then, [I] may have dipped into it and not saved for a house.”

LISA holder who had withdrawn to purchase a house, ‘Irregular Saver’

5.5 Reactions of non-holders to key features of the savings account

Non-holders were presented with information about the LISA during the interview. This information covered the LISA bonus, house buying requirements, and the withdrawal charge. Non-holders shared their views on these different elements.

LISA bonus

As with LISA holders, the bonus was seen by non-holders included in this research as the primary attraction, with those on lower incomes in particular viewing the level of bonus to be appropriate.

“That is really nice, 25% is a lot, much better than “Help to Save”. That’s 50% over 2 years!”

Non-holder, ‘Irregular Saver’

House buying requirements

The house price cap was not a concern for non-holders in this research who were either ‘Irregular Savers’ or ‘Cushioned Savers’.

“It’s quite good, I might decide to buy a house at some point in my life, so it would be great to use then.”

Non-holder, ‘Irregular Saver’

Although not a common finding, one ‘Affluent Saver’ who did not have a LISA thought that, because of rising property prices, the cap should be higher. This echoed findings from some LISA holders included in this research. This participant suggested that a limit of around £600,000 would more closely align with contemporary housing market costs.

There was also some resistance to the requirement of using a solicitor among some non-holders in this research, although these participants also revealed low awareness of the house-buying process in general.

Withdrawal charge

Non-holders in this research tended to be aware of some restrictions around withdrawing from the LISA but had limited knowledge of specifics. There were misperceptions around the age limits and requirements to pay in minimum amounts. Non-holders in this research were generally unaware that there was a withdrawal charge.

6. Decision making in relation to the LISA

This chapter summarises the decision-making process in relation to the LISA. It looks at the factors that were most important in encouraging LISA holders to open one, and the reasons why non-holders had not opened a LISA.

6.1 LISA holders and their motivations

The role of the bonus

Among LISA holders included in this research, motivations for opening a LISA depended on savers’ own financial situations, in particular their level of financial comfort and their savings priorities.

The 25% bonus, which was seen as generous, was the main attraction. ‘Affluent Savers’ often considered the generosity of the LISA bonus as similar to returns offered by other savings vehicles with high growth potential, such as pensions and stocks and shares ISAs. ‘Cushioned Savers’ and ‘Irregular Savers’ tended to consider the generosity of the LISA bonus against savings products with much lower levels of return, such as cash ISAs.

Nonetheless, not all LISA holders included in this research had fully researched the details of the LISA before opening their account. This was often because influential sources of advice like Money Saving Expert, as well as other financial media, reported the 25% bonus level to be a very attractive rate. This endorsement meant that some LISA holders did not proactively research other investment options for themselves.

“The government bonus because it was so generous…and the interest rates were almost like a bonus on top of that.”

LISA holder who made an authorised withdrawal in the last 5 years, ‘Cushioned Saver’

Both ‘Cushioned Savers’ and ‘Affluent Savers’ in this research considered the risk of the withdrawal charge when opening their LISA but were confident they could afford the contributions that they made. Although they had mixed levels of knowledge when it came to the specifics of withdrawal charge, the 25% bonus was thought to be worth the risk of a possible penalty. Despite this, these participants did not always realise that the unauthorised withdrawal charge would penalise beyond the bonus and result in a loss on their original savings.

Similarly, ‘Irregular Savers’ tended to see the generous bonus as worth the trade-off for the withdrawal charge, though interviews with some of these savers revealed that they were not aware of the withdrawal charge at all. ‘Irregular Savers’ were either confident they would not withdraw their money unnecessarily and had therefore not investigated the charges further, or were not using their account at the time of the interview.

The interviews revealed that the precise conditions around withdrawal tended not to impinge on the decision of participants to invest in a LISA or not. The bonus amount meant that LISA holders in this research had skimmed over the details, such as those around house purchase and withdrawal, rather than conducting a full and considered weighing of risks.

Personal circumstances as a motivator

Some LISA holders included in this research had opened a LISA because they were saving for later life, whilst others were intending to buy their first home, and some had no clear purpose in mind.

Those interviewed who specifically opened the LISA to save for later life tended to be financially comfortable, as they had typically already purchased property and regarded the LISA as an extra pension pot. This group included those who intended to use the LISA as a pension because they were self-employed, as well as those who wanted to spread the risk profile of their money to a greater extent than was possible with a traditional pension. In some cases, they were looking to maximise their tax-free savings allowance.

“I thought that it would be a nice return on whatever I save – if you think about every other pot, it’s 1% if you’re lucky. I suppose [I] did it for retirement but I didn’t think about that as there’s a couple of decades to go before then.”

LISA holder who had made an unauthorised withdrawal, ‘Cushioned Saver’

“I have an existing pension scheme, so I am funding that too, but if one is subject to a rule change, then you have also saved in another way.”

LISA holder who had not withdrawn, ‘Affluent Saver’

Those interviewed who had opened the LISA to save for their first house were in a range of financial contexts. As might be expected, those included in this research who had already withdrawn funds to purchase their first home tended to be more financially comfortable ‘Cushioned Savers’ or ‘Affluent Savers’.

Despite being unable to accrue large savings, ‘Irregular Savers’ and ‘Cushioned Savers’ included in this research who had lower incomes tended to have opened a LISA to save for their first home. Getting on the property ladder was a key aim for these individuals. This group often included those who needed to save for a deposit on a short timescale and lower income ‘Cushioned Savers’ who were saving as much as they could afford regularly.

“Our financial situation was not great, but this was an opportunity to save towards a house, so we could start small and end up with something for our future.”

LISA holder who had not withdrawn, ‘Cushioned Saver’

Those included in this research who had no clear purpose in mind for their LISA savings tended to have limited prior knowledge of the product, were generally highly focused on financial opportunity, and were motivated solely by the attractive return on investment. This was particularly true for those interviewed who were close to the age cap: they tended to have lower-incomes and did not necessarily end up paying into the LISA regularly.

“It was a bit difficult around that time, I had just started a new job…But I open it (LISA) with a small amount, I didn’t want to miss the opportunity. Savings over time has increased, as my salary has gone up.”

LISA holder who had not withdrawn, ‘Cushioned Saver’

Some LISA holders who took part in this research had opened a LISA because they had been encouraged by others to do so. These tended to be younger people who had been urged by their relatives to open an account and start saving. They tended not to be keen on the prospect of using the LISA savings for later life due to the long timeframe.

In a few instances, LISA holders included in this research had changed the purpose of their LISA savings after opening the account. This tended to be because their expectations of the house they wanted to purchase had changed after opening the LISA, or house prices had increased beyond the LISA house price cap.

6.2 Non-holders and their motivations

Non-holders who took part in this research were all presented with information about the LISA and asked for their views towards opening one.

Non-holders in this research had several reasons for not opening a LISA. Some were already home-owners and felt that the LISA would have been beneficial to them to purchase their first home if they did not already own one. Others felt they did not have enough income to allocate to savings and, in particular, they were put off by the idea of not being able to access their money without incurring a charge. Non-holders often had other savings accounts that did not have the withdrawal limitations of LISA, making their savings seem more accessible should they need it.

“I can’t currently because I need some money. Maybe once my finances become a bit better.”

Non-holder, ‘Cushioned Saver’

Access to savings in a LISA was a concern for non-holders in this research, irrespective of saver group: ‘Cushioned Savers’ and ‘Affluent Savers’ liked having the freedom to move their money around as they chose, whilst ‘Irregular Savers’ with lower incomes had often not yet considered saving for a first home or for later life as other needs on their budget were more pressing. These non-holders often cited the increased cost of living as a reason why they found it difficult to save regularly. Without substantial savings to draw on in an emergency, any savings they did have needed to be instantly accessible.

“The first thing I consider is that I can pay in any amount of money, and I can withdraw the money any time… I wouldn’t take extra bonuses into consideration [if I couldn’t withdraw].”

Non-holder, ‘Irregular Saver’

It is important to note that the withdrawal charge was not a long-term deterrent for all non-holders included in this research. For example, some of those who felt their financial situations would improve said they would consider opening a LISA when they had the funds. They felt that the withdrawal charge was a necessary and useful deterrent.

“It seemed good that you can’t take the money out. Not being able to get to it, the temptation’s not there to spend it. I liked that idea.”

Non-holder, ‘Cushioned Saver’

For some non-holders in this research, concerns around accessibility related to an unpredictable future. With the inability to access funds until age 60, some younger non-holders felt that too much could change in this time to lock their money away in a LISA. Although not a common finding, some non-holders included in this research had chosen not to invest in a LISA because they had been put off by specific requirements and the impact they could have in the future, such as the house price cap or 12-month condition.

“It’s completely not fit for purpose. The £450k cap makes it a trap, who knows what house prices are going to be. I don’t know what you can buy in London for £450k.”

Non-holder, ‘Affluent Saver’

A lack of trust in the LISA overall was another recurrent reason for not opening an account, cited by non-holders in this research at all levels of financial comfort. For example, some worried about a potential change of government, which they feared might lead to changes in the product, including a reduced bonus or discontinuation of the product. This concern led them to trust pensions more than the relatively new LISA.

Some non-holders in this research were also put off by a more general lack of trust in long-term savings schemes. These participants were often not considering the LISA for purchasing a home, and felt that much could change economically and politically before they were 60 and looking to draw on the LISA to fund their pension.

“I would hate to put my money somewhere and then not get it back. I would be terrified in putting all my faith in one person or place.”

Non-holder, ‘Cushioned Saver’

Not all non-holders in this research had considered opening the LISA prior to the interview. Some non-holders on higher incomes were not aware of specific LISA conditions beforehand, but, once they had learned about the account, said they would actively consider opening a LISA.

“I probably would have opened one earlier if I knew about it.”

Non-holder, ‘Cushioned Saver’

7. Perspectives on withdrawal

This chapter explores perceptions and experiences of the withdrawal process. It first looks at attitudes of LISA holders and non-holders towards the withdrawal charge of 25%. It then summarises the motivations of different groups of LISA holders, including those who had not withdrawn their funds, those who had done so to buy a house, and those who had made unauthorised withdrawals.

7.1 Those supportive of the withdrawal charge

All participants were provided with information about the withdrawal charge as part of the interview, including LISA holders and non-holders. Perceptions of the withdrawal charge tended to be linked to attitudes towards saving more generally, rather than whether or not people held a LISA.

Most participants understood the logic underpinning the withdrawal charge. They generally saw the withdrawal charge as an important feature of the LISA, helping to motivate people to maintain their savings for their intended purpose. This was particularly true for LISA holders in this research who had not yet made a withdrawal or those who had successfully used their LISA savings to purchase a house.

“Those factors are really reasonable… I think it’s a really good figure because it makes you question whether or not you really need to take that money out.”

Non-holder, ‘Affluent Saver’

Among those who felt positively towards the withdrawal charge, it was seen as a useful deterrent, discouraging LISA holders from withdrawing funds prematurely and helping to promote long-term saving for purchasing a home. These participants believed that, if the withdrawal charge was lower, it might inadvertently encourage early withdrawal, reducing the LISA to a regular savings account. This was particularly true among ‘Affluent Savers’ and ‘Cushioned Savers’ who considered themselves committed to saving.

“On a practical level I thought this was good, as it’s a level of deterrent. You also get a bonus, so makes sense that there are penalties.”

LISA holder who had not withdrawn, ‘Affluent Saver’

Although not a common finding, one LISA holder acknowledged that the charge might also offset administrative costs and support the provision of government bonuses to savers, further enhancing the benefits of the LISA.

For some LISA holders included in this research, the acceptance of the withdrawal charge was underpinned by a high level of confidence that they would never need to encounter such a charge.

7.2 Those opposed to the withdrawal charge

Some LISA holders in this research, particularly those who had made unauthorised withdrawals, were not in favour of the withdrawal charge. They cited unforeseen changes in their circumstances as a reason for withdrawing their money, and felt the charge was further penalising them for their misfortune. This view was also common among ‘Irregular Savers’ regardless of LISA status, LISA holders not saving to buy a house, and some non-holders.

A further reason given by LISA holders and non-holders in this research who were opposed to the withdrawal charge was that it was unfair that the charge went beyond the bonus, including some of the savers’ original investment. This was particularly true for LISA holders who had not understood that the withdrawal charge exceeded the account holders’ bonus and removed part of their original savings prior to the interview.

This view was more common among those interviewed who were saving to a longer timescale for later life rather than a first house purchase. Although pensions also have significant penalty charges for early withdrawal, they were not generally mentioned in this context, which may suggest that savers tend not to engage with these finer details until much later in life.

“The incentive for saving should be strong enough with the bonus, with you then losing some of the money you put in. It seems harsh.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

For some LISA holders in this research, negative views of the withdrawal charge were driven by the prospect of losing the bonus for an unauthorised withdrawal. These LISA holders had come to see the bonus, as well as their original savings, as their own money.

Echoing the findings earlier in this report, LISA holders and non-holders included in this research who were less financially comfortable viewed the withdrawal charge negatively. These participants felt uneasy about not being able to access their money. They were opposed to the charge either because of a high degree of loss aversion, or through a sense of injustice. This included younger participants, who tended to say they did not yet feel financially secure, and the prospect of being unable to access their money without a penalty caused them anxiety.

“People should be able to choose what to do with their accounts and their money, and they should be able to make their own decisions about when they might need that money.”

LISA holder who had withdrawn to purchase a house, ‘Irregular Saver’

Once informed about the LISA during the interview, the withdrawal charge was generally the deciding factor for not opening a LISA for non-holders who were ‘Irregular Savers’ or ‘Cushioned Savers’ on lower incomes.

“What stopped me is that there’s a charge to withdraw the money, sometimes you get into a situation, and you have no choice.”

Non-holder, ‘Irregular Saver’

7.3 Perspectives on withdrawing from the LISA for those who had not withdrawn

LISA holders in this research who had not withdrawn from their LISA included those saving for their first house, those saving for later life, and those who were unsure what their savings were for. All of these participants said that they were confident that they would never need to make unplanned withdrawals.

LISA holders in this research who were saving for later life tended to be older homeowners. They were more financially comfortable and were using the LISA as a supplementary pension pot, or a primary pension pot for those who were self-employed. Those interviewed who were saving for later life were particularly confident that they would not need to make an unauthorised withdrawal.

LISA holders included in this research who had not withdrawn from their LISA and were saving for their first home tended to be ‘Irregular Savers’ or ‘Cushioned Savers’, whereas ‘Affluent Savers’ tended to have bought houses already.

“I knew we were never going to take this money out, we have other resources…we have no intention of touching this money.”

LISA holder who had not withdrawn, ‘Affluent Saver’

Some LISA holders who were ‘Irregular Savers’ and saving for their first home had not yet started putting money into their LISA but had opened it in anticipation of improved financial circumstances. Amongst those who had started using their LISA, a common concern was that it might take them a long time to save enough money for a house deposit. They were thus strongly inclined not to withdraw their money.

“If I had spare money, the LISA would be first port of call to put money in to, but I haven’t had enough income to build up a habit so I haven’t been able to set up a direct debit for example.”

LISA holder who had not withdrawn, ‘Irregular Saver’

Some LISA holders in this research who had not withdrawn funds were unsure about whether to use the LISA for a house purchase or later life. They had largely been attracted by the bonus. Among this group of participants, not all were actively paying into the LISA, either because they could not afford to, or because they had opened the account opportunistically. These participants tended to be younger and less affluent.

“Not going to touch it for the next two years, the target is still to buy a house. We are not eligible for a mortgage yet, the deposit is still too small. We don’t know if we will buy a house but will continue with it until 60.”

LISA holder who had not withdrawn, ‘Cushioned Saver’

7.4 Perspectives on withdrawal for those who had bought a house

Those included in this research who had used their LISA to purchase a house were generally pleased with their experience. Most reported that they had found the process of withdrawal a simple one, which had been handled mostly by their solicitor.

“I think I got £2,000 out of it, I got a decent amount. In the end, it was basically the bonus that was what made us able to buy a house and for me to not clear out all of my savings.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

However, in some cases, administrative issues did surface. Some LISA holders in this research identified the need for better communication of the process by their providers. For example, some providers had suggested the money might take up to 30 days, rather than 7 days, to withdraw. There was also low awareness of the 12-month withdrawal limit, which caused delays for some. In addition, some mentioned that their solicitor had lacked knowledge of how to interact with the LISA, and that their provider proved to have better knowledge of the process of using their LISA savings to purchase a house.

As discussed earlier in this chapter, those included in this research who had used their LISA to purchase a house particularly favoured the withdrawal charge: they felt it had encouraged them to keep their money in the LISA to achieve their goal of a house purchase, rather than using it for something else.

“I was not working for a few months, so if there were no penalties and times were tight then, I may have dipped into it and not saved for a house.”

LISA holder who had withdrawn to purchase a house, ‘Cushioned Saver’

After withdrawing their funds, these LISA holders tended not to have considered whether their LISA should remain open or not. There was some confusion amongst these participants about whether the same LISA account could also be used to save for later life.

LISA holders included in this research who had closed or no longer used their account following the withdrawal provided several reasons for this. Some said their savings goal had been achieved once their house was purchased. Others said they could no longer afford to save into the LISA, or that they had switched to using other vehicles to save for their retirement. The interviews revealed some uncertainty about the relative advantages and disadvantages of saving for retirement through pensions and LISAs, although this was generally not seen by participants as something urgent to resolve.

7.5 Perspectives on withdrawal for those who made unauthorised withdrawals

Those included in this research who had made an unauthorised withdrawal from their LISA tended to be aware of the withdrawal charge during the interviews. However, they did not necessarily know that the penalty goes beyond the bonus. Most participants in this group had only been charged the lower 20% penalty that was in place during the COVID pandemic, which may explain why there was limited awareness of the standard withdrawal conditions.

“I knew the charge was there but thought, if I lose it, I lose it.”

LISA holder who had made an unauthorised withdrawal, ‘Irregular Saver’

Those who had made unauthorised withdrawals included ‘Irregular Savers’ and ‘Cushioned Savers’ who were less clear about their overall financial plan for the future and not actively paying into their account, but also included ‘Affluent Savers’ who were more strategic about their investments.

Those who had made unauthorised withdrawals gave a number of reasons for doing so during the interviews. Some had simply been caught out because their desired house purchase did not meet the LISA conditions for withdrawal. For instance, 1 participant withdrew the money to purchase their first house within 11 months of opening the account. They were aware of the withdrawal charge but not the 12-month condition and had not expected to lose money.

Others had encountered financial difficulties that meant they needed to draw on the funds in their LISA. These included savers who had to pay off debts from funding house repairs or IVF treatment, to pay a deposit on a rental property, or needed to rely on the savings because they had become unemployed.

In some cases, LISA holders with higher incomes, regardless of their saver group, had strategically withdrawn their funds due to a change in circumstances. For instance, some who withdrew when the penalty was reduced to 20% during COVID did so to buy a house costing over £450,000 and wanted to access their funds as cheaply as possible.

Across most LISA holders included in this research, withdrawing money from a LISA (other than for the intended purpose of buying a home or for later life) was generally considered a ‘last resort’ that they wanted to avoid. However, this was not the case for those with low financial resilience who had made unauthorised withdrawals for a variety of reasons. These included paying a deposit for a rental property, day-to-day costs whilst unemployed, or a deposit on a property purchase that was not eligible within the LISA criteria.

For example, 1 participant, whose financial prospects had since improved, had withdrawn the money in anticipation that they might need it. They were aware of the often longer withdrawal time, and therefore could not afford to have their savings in a place that they would be unable to access them should the need arise. They withdrew when the charge was reduced to 20% during the pandemic, although did not view the LISA positively and did not expect to use it again despite improved circumstances.

“I would normally go into other savings account first – but I didn’t want to empty them out because I know I can go to them quite quickly – I can’t afford to be desperate and rely on the LISA that’s going to take 8 weeks.”

LISA holder who had made an unauthorised withdrawal, ‘Cushioned Saver’

“It’s the last place I’d look because of the charges.”

LISA holder who had not withdrawn, ‘Affluent Saver’

Some of those who made unauthorised withdrawals in this research kept their LISA active afterwards, continuing to pay into the account. This included those who had originally opened it to use for a house purchase, and were either still looking to buy a house or had reconsidered the purpose of their LISA as a later life savings vehicle. Closing the LISA entirely was rare amongst LISA holders in this research – most had kept the LISA open but said they had forgotten about it or had not got around to closing it yet.

8. Testing hypothetical withdrawal charges and bonus levels

This chapter summarises the response of LISA holders and non-holders towards 2 hypothetical scenarios that were presented in the interviews which explored different ways that various features of the LISA could be adjusted (the scenarios are included in full in the technical appendix). This chapter looks at the change in saver perceptions and potential behaviours as a result.

8.1 Reduction of withdrawal charge to 20%, bonus level remains at 25%

When scenario testing a hypothetical reduction of the withdrawal charge to 20%, it was clear that there was little understanding amongst LISA holders and non-holders included in this research that the current 25% charge would leave those who made an unauthorised withdrawal with less money than they had deposited into the LISA. Once this was understood, there was broad acknowledgement that reducing the withdrawal charge to 20% would be fairer than the current rules. LISA holders and non-holders in this research held similar views on this matter.

“With a 20% charge I would put more money in because if I had to withdraw in an emergency, it would be less of a risk. I would save an extra £50 into the LISA which is about 30% more a month.”

LISA holder who had not withdrawn, ‘Cushioned Saver’

‘Irregular Savers’ and ‘Cushioned Savers’ on lower incomes, including both LISA holders and non-holders, felt that losing any of the principal savings amount seemed unfair. In their view, people’s financial circumstances could change in unpredictable ways. They felt they should not be penalised while aiming to save for a house or later life. Some mentioned that they may be incentivised to save more if the withdrawal charge didn’t penalise their own savings.

“If the point of the LISA is to force people to save, then it’s good to have a higher charge. But it does feel that just losing the charge and breaking even if withdrawing early, is more fair than actually losing money.”

LISA holder who had withdrawn to purchase a house, ‘Cushioned Saver’

LISA holders in this research who were ‘Cushioned Savers’ with higher incomes and ‘Affluent Savers’ did not have strong feelings on the charge. They acknowledged that other people might find themselves in situations where they needed to withdraw for unauthorised reasons. However, these participants were not worried about finding themselves unable to maintain their level of saving. They felt that a reduction in the charge would not encourage them to withdraw.

“I would never see myself in a situation where I would have to face of charge if I took my money out.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

Most of those included in this research who had made unauthorised withdrawals were both strongly opposed to the 25% charge, but also wanted to see the 25% bonus maintained. Nevertheless, there were some participants in this group who felt that the 25% charge acted as an effective deterrent from withdrawing without good reason and did not want to see it changed. However, they wanted to see flexibility introduced for extenuating circumstances.

“There is an element of being disgruntled by the charge because it is your money. [The provider] were holding my money and making money off my money, so there is an element of disgruntlement. You do think ‘why am I being charged for taking my own money out?’”

LISA holder who had made an unauthorised withdrawal, ‘Cushioned Saver’

Although not a common finding, some LISA holders who had not withdrawn and some non-holders included in this research felt that the 25% charge was punitive which discouraged withdrawal. These participants mentioned that the charge did not or would not impact the amount they saved, but they may be more likely to withdraw money from their LISA if they didn’t expect to incur a charge.

“It makes sense to forfeit the bonus, because you’re withdrawing for a reason other than what the bonus was intended for. For me, this has no real impact on my decision-making. I would still be happy to go for it.”

Non-holder, ‘Cushioned Saver’

8.2 Reduction of withdrawal charge to 20%, bonus reduced

When a hypothetical scenario was introduced that involved a reduced withdrawal charge but a lower bonus, there were differences in perceived impact depending on financial context. LISA holders and non-holders were prompted with scenarios describing different bonus levels of 20%, 10%, and 5%.

Whilst some participants viewed the reduced withdrawal charge as equally flexible and accessible, allowing people to save whilst not penalising their savings, others felt they were more incentivised to save by the higher bonus of 25%.

Overall, LISA holders included in this research felt that a generous bonus was more important than the flexibility of a reduced withdrawal charge. This was especially the case for ‘Cushioned Savers’ and ‘Affluent Savers’ who said they would not pay more into their LISA because they were either saving the maximum up to the bonus cap, or the maximum they could spare alongside other savings. These participants felt there was minimal risk of needing to withdraw for an unauthorised reason and therefore tended to prefer higher bonus levels explored in this scenario.

“In general I would prioritise the bonus over the withdrawal fee.”

Non-holder, ‘Cushioned Saver’

There was some evidence that some non-holders might be more motivated to open a LISA by a reduced withdrawal charge, rather than a higher bonus. This potentially reflected a greater sense of financial insecurity and anxiety at the prospect of their money being inaccessible without a large penalty.

“If there was no withdrawal charge - yes! What other account gives you this?”

LISA holder who had made an unauthorised withdrawal, ‘Affluent Saver’

Among LISA holders included in this research who were ‘Irregular Savers’ and ‘Cushioned Savers’ with lower incomes, the scenario of a lower bonus with a reduced withdrawal charge was attractive. These participants tended to say that they preferred an arrangement akin to a regular savings account, that was easily accessible and would also beat market interest rates (such as over 5%). However, like other LISA holders, these participants had opened the account principally for the attractive bonus, and so receiving a 25% bonus with the potential prospect of a withdrawal charge was still, overall, a preferred scenario for them.

Preference for the higher bonus was greater among those in this research who had opened a LISA in order to save for a house. These participants tended to say that a reduced withdrawal charge would make them pay in more each month, because they would be less concerned about losing their money, but also that they preferred the higher bonus in order to achieve their savings goal quickly. A generous bonus thus emerged as being of higher importance for those saving for a house purchase than flexibility over their savings.

“For me the size of the bonus was much more important than the size of the withdrawal charge.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

Those included in this research who intended to use the LISA savings for later life, and had lower incomes, tended to attach more value to the flexibility that a scenario with no withdrawal charge offered. Since saving for retirement is a longer-term goal, there was some caution amongst these LISA holders that they may need the money they had saved in their LISA before reaching 60. These LISA holders also reported some concerns that the terms of the LISA could change in the future. Although there was still a preference for a high bonus, these LISA holders had a higher degree of anxiety and awareness of the risk involved for them.

9. Impact on savings

This chapter examines the impact on saving behaviour of holding a LISA, both among LISA holders in general and among specific groups of LISA holders. It then compares this to the savings behaviour shown by non-holders included in this research.

9.1 Impact among LISA holders

Overall, LISA holders who took part in this research felt that holding a LISA had positively impacted their saving behaviour. Due to the government bonus, they felt that it had not only assisted them in saving more but also accelerated their timelines for purchasing their first homes, where this was their savings goal.

There were, however, some differences between LISA holders in this research in terms of the impact on saving behaviour.

For LISA holders included in this research who were ‘Irregular Savers’ and ‘Cushioned Savers’, the government bonus provided an incentive, encouraging them to save as much as they could. This was particularly true of younger LISA holders.

In contrast, LISA holders in this research who were ‘Affluent Savers’ reported that they would likely be saving at least the maximum amount in any case (£4,000 per year). For these participants, the bonus therefore did not necessarily incentivise them to save more, but rather encouraged them to allocate as much of their savings as possible to the LISA.

“I would have saved that money in a different place if I hadn’t had the LISA… but the government bonus helped me to buy a house probably 6 months earlier than I could have otherwise.”

LISA holder who had withdrawn to purchase a house, ‘Affluent Saver’

All LISA holders included in this research who had withdrawn from their LISA to make a house purchase felt that the LISA had accelerated their house purchase timeline. Those who did not regard themselves as ‘savers’ prior to the LISA also felt it had incentivised them to make extra savings.

“If the withdrawal charge was lower, we would have probably been more tempted to use the money for a holiday or something like that. The charge really helped us save for our first home.”

LISA holder who had withdrawn to purchase a house, ‘Cushioned Saver’

Among those who had not withdrawn from their LISA at the time of interview, the perceived impact of the LISA on their saving behaviour varied. As expected, for those who had not paid into the LISA they had opened, the perceived impact on their saving behaviour was minimal.

“[The LISA has had] very little [impact] to be honest, it’s just modest amounts that go in there… it’s not a major factor into my saving decisions“

LISA holder who had not withdrawn, ‘Affluent saver’

Whilst participants who were using the LISA to save for retirement were largely happy with the bonus, their perceptions of how the LISA had impacted their saving behaviour were mixed. Most people in this group viewed the LISA as an extra ‘pot’ that helped to diversify their savings and did not feel it had changed their behaviour, although some felt the bonus had indeed encouraged them to save more.

Those included in this research who had made an unauthorised withdrawal tended not to associate their saving behaviour to the LISA for a variety of reasons. Some in this group were no longer using the LISA after their withdrawal – this was attributed, in some cases, to their negative experiences with the LISA. Others who had kept their account open after an unauthorised withdrawal were using the LISA for retirement savings. Although this group felt positively about the prospect of receiving the bonus, they did not think that the LISA had increased the amount they were saving.

Younger LISA holders included in this research, whose savings behaviours were less established, tended to say that having a LISA in itself had motivated them to save. For example, some in this group mentioned that the specific purpose of the LISA for either buying a house or saving for retirement had made them act more intentionally in their saving behaviour. This meant that they felt more encouraged to save by having the LISA.

“It’s brought the conversations about retirement and pensions forward, I’d probably have started to talk about it at 50.”

LISA holder who had made an unauthorised withdrawal, ‘Cushioned Saver’

9.2 Impact among non-holders

Some non-holders included in this research were receptive to opening a LISA in the future, irrespective of saver group. However, a common sentiment was that the restrictions of the account, such as the withdrawal charge and restrictions on withdrawal time for purchasing a house (the 12-month rule), might limit how much they would save into the account.

“At the moment I put about £1,000 a month into savings, so I’d probably put 75% into savings and the other 25% towards a LISA, because some of the accounts I can lock away and get better interest overall.”

Non-holder, ‘Affluent Saver’

Non-holders in this research who were ‘Irregular Savers’ and ‘Cushioned Savers’ with lower incomes tended to report that they were already saving as much as they felt they could afford. They were hesitant about the idea of having a savings account that could be inaccessible due to withdrawal penalties. As a result, they reported that they would likely save less into a LISA, if they had one, rather than being incentivised to save more. They would aim for a ‘safe’ amount that they felt comfortable locking away. The balance between growing their savings and accessibility was highlighted as a crucial consideration for those who had not opened a LISA.

“I would do everything to avoid withdrawing the money – I would save less – I would like to save a safe amount of money I can afford, so that I wouldn’t have to withdraw.”

Non-holder, ‘Irregular Saver’

Among non-holders who took part in this research, in general, attitudes towards the withdrawal charge emerged as a key driver of likely impact on saving behaviour. Those who favoured the 25% charge thought it would encourage them to save, whilst those against it thought they would only save a safe amount into it. This in turn was also shaped by participants’ level of financial comfort. Those who felt they could not afford to save more would not be incentivised to do so, whilst those who believed they could save more thought that the charge might have an incentivising effect on their savings behaviour.

“If this was my main savings account, I would spend less and save as much as possible to maximise my guaranteed return.”

Non-holder, ‘Cushioned Saver’

10. Technical appendix

10.1 Sample profile

The final composition of the sample is outlined below.

Table 1: Recruitment profile

Use of LISA	Sample source	Completed interviews
Current LISA holders not yet withdrawn	HMRC data	15
Withdrawn to make a house purchase in last 5 years	HMRC data	15
Made an unauthorised withdrawal in last 5 years	HMRC data	10
Eligible, aware non-holders	Free-found	10

Table 2: LISA holders detailed profile

Characteristic of interest	Completed interviews
LISA holders who made a withdrawal and no longer hold a LISA	8
LISA holders who made a withdrawal and continue to hold a LISA	17
LISA holders aged under 30	9
LISA holders aged 30 to 39	20
LISA holders aged 40 or above	11
Male	14
Female	26
Ethnicity: white	35
Ethnicity: ethnic minority background	5
Self-employed	9
Working for an employer	31

10.2 Recruitment screener

The final recruitment screener used in this research.

Introduction

HM Revenue and Customs (HMRC) has asked Ipsos, an independent research organisation, to carry out important research on the Lifetime ISA.

The Lifetime ISA (LISA) is a type of savings account launched by the UK government in April 2017 to help people save for their first home or later life. The LISA allows individuals to save up to £4,000 per year and receive a 25% bonus from the government on their savings until they reach the age of 50. To open a LISA, you must be aged 18 to 39 and a resident in the UK (except in a small number of circumstances, that is, as a crown servant, their spouse or civil partner). Cash or stocks and shares can be held in a LISA, or a combination of both.

While HMRC data on LISAs can identify subscriptions, account values and withdrawals, it does not provide information about the experience of holding a LISA, what LISA holders’ future intentions are, and why those eligible for a LISA have so far not opened one. Qualitative research with LISA holders and eligible non-holders (including both employees and the self-employed) will provide high quality evidence to inform any future LISA reform.

HMRC uses information it has to invite people to participate in research to improve and develop their services. Ipsos has received the following information from HMRC because records indicate you have held a LISA account at some point since April 2017.

Your contribution to this research is extremely valuable and will help HMRC to improve its services. You will have received a letter from Ipsos and HMRC informing you about this research recently.

As a thank you for your valuable contribution, Ipsos will provide you with either a £60 shopping voucher (for Love2Shop) or a donation to a charity of your choosing. Your participation in this research is entirely voluntary and you may withdraw from the research at any point.

The data collected is completely confidential and will only be used for research purposes. We will not include any information that could identify you. Assisting with this research will not have any effect on your tax affairs.

Interview details: Interviews will take place in July/August at a time convenient for you.

• interviews will take place over Microsoft Teams or over the telephone, depending on your preference
• interviews will last up to 60 minutes

Data privacy/GDPR: No identifiable information collected will be passed back to HMRC and your anonymity will be protected at all times (HMRC will not know you have taken part in an interview, and it will not be possible to identify individuals from the research findings). Please offer to send them Ipsos’s privacy policy which provides more detail about how their data will be used, if necessary.

We want speak to people with a range of views and experiences, so to start with I would like to ask you some quick questions to confirm that we are speaking to the correct person for this research. These questions should take no more than 5 minutes to answer.

At any time during this call, you can decline to answer these questions and also request to end this conversation/call. If you decide to participate in the research, you can also withdraw at any time (either before the interview takes place by contacting me, or when the interviewer from Ipsos calls you).

LISA holder

Screening

Ask all

Question 1: Can I confirm that you are named contact?

• yes – go to question 3
• no – go to question 2
• don’t know – Thank and close

Question 2: Could I please take your name? (Recruiter to record.)

Question 3: We would like to talk to individuals who have ever held a Lifetime ISA, sometimes known as a ‘LISA’. Please could you confirm if you have held such an account at any time in the last 6 years (i.e., since April 2017)?

• yes – just one
• yes – more than one
• no, never held a LISA account – Thank and close
• don’t know – Thank and close

Ask all

Question 3: That’s great. I now need to ask you a couple of questions about how you have used the LISAs so far. Please could you indicate if any of the following apply to you?

• I have never withdrawn money from a LISA – go to question 6
• I have made a withdrawal from a LISA to contribute to the purchase of my first home – go to question 4
• I have made a withdrawal from a LISA for another reason – go to question 4
• don’t know – Thank and close

Ask Question 3 = those who have made a withdrawal

Question 4: When you withdrew money from your Lifetime ISA, did you pay a withdrawal charge? The withdrawal charge is 25% of the amount withdrawn.

• yes – I paid a withdrawal charge when I withdrew money from a LISA
• no – I did not pay a withdrawal charge when I withdrew money from a LISA
• don’t know – Thank and close

Ask Question 3 = those who have made a withdrawal

Question 5: And finally, after you withdrew money from your Lifetime ISA, did you close the LISA, or did you keep the account open?

• I closed the LISA – I no longer hold the account
• I did not close the LISA – the account is still open
• don’t know – Thank and close

Thanks. We now need to ask you a couple of quick questions about yourself, to ensure we are talking to a wide range of people. If you do not wish to answer these, that is fine, but we may be unable to recruit you to the interview.

Question 6: Which of the following best describes how you think of yourself?

• male
• female
• in another way
• don’t know – Thank and close

Question 7: Which of the following age ranges do you fall into?

• under 30
• 30 to 39
• 40 or over
• don’t know – Thank and close

Question 8: How would you describe your ethnic background?

• White
• Mixed/multiple ethnic groups
• Asian/Asian British
• Black/African/Caribbean/Black British
• other ethnic group
• don’t know – Thank and Close

Question 9: How would you describe your employment status?

• working for an employer (including full-time, part time)
• self-employed (including full-time, part time)
• not in work (including non-working students, retired) – Thank and close
• don’t know – Thank and close

Question 10: And in which region/nation of the UK are you based?

• London or the South East
• Rest of England
• Scotland
• Wales
• Northern Ireland

Question 11: Thank you very much for your responses, we would like to book in an interview with you. As I mentioned, the call will be with an Ipsos researcher over Microsoft Teams or telephone. Could you please confirm the date and time that would be most suitable for you?

Record date and time

Ask all

Question 12: Could I please confirm your email address, so we can send you a calendar invitation?

Ask all

Question 13: Can I please have the best number to reach you for the interview?

Confirm number

Non-holder

Screening

Question 1: Could I please take your name? (Recruiter to record.)

Question 2: We are conducting research into awareness and use of the Lifetime ISA. Are you aware of the Lifetime ISA, sometimes known as a ‘LISA’?

• yes – aware
• no – unaware – Thank and close
• don’t know – Thank and close

Ask all

Question 3: As a bit of background, the Lifetime ISA (LISA) is a type of savings account launched by the UK government in April 2017 to help people aged save for their first home or retirement. People aged 18 to 39 can open a LISA. The LISA allows individuals to save up to £4,000 per year and receive a 25% bonus from the government on their contributions until they reach the age of 50.

Have you ever opened a Lifetime ISA account?

• yes – Thank and close
• no
• don’t know – Thank and close

Ask all

Question 4: And do you regularly save money? This could be into a standard current account, savings account or ISA or another way.

• yes
• no – Thank and close
• don’t know – Thank and close

Thanks. We now need to ask you a couple of quick questions about yourself, to ensure we are talking to a wide range of people. If you do not wish to answer these, that is fine, but we may be unable to recruit you to the interview.

Question 5: Which of the following best describes how you think of yourself?

• male
• female
• in another way
• don’t know – Thank and close

Question 6: Which of the following age ranges do you fall into?

• under 30
• 30 to 39
• 40 or over
• don’t know – Thank and close

Question 7: How would you describe your employment status?

• working for an employer (including full time, part time)
• self-employed (including full-time, part time)
• not in work (including non-working students, retired) – Thank and close
• don’t know – Thank and close

Question 8: And do you now, or have you ever, owned your own home?

• yes
• no
• don’t know – Thank and close

Question 9: And in which region of the UK are you based?

• London or the South East
• other region of the UK

Question 10: Thank you very much for your responses, we would like to book in an interview with you. As I mentioned, the call will be with an Ipsos researcher over Microsoft Teams or telephone. Could you please confirm the date and time that would be most suitable for you?

Record date and time

Ask all

Question 11: Could I please confirm your email address, so we can send you a calendar invitation?

Ask all

Question 12: Can I please have the best number to reach you for the interview?

Confirm number

10.3 Discussion guides

The final discussion guides used in this research.

Discussion guide for interviews with LISA holders

Introduction

Interviewer to introduce self & thank participant for taking part. explain the purpose of the session/research.

Thank participant for taking part.

Introduce yourself and Ipsos: I am a researcher at a company called Ipsos, which is an independent research organisation. HMRC have commissioned us to conduct research into the Lifetime Savings ISA

Explain the research: I understand that discussing financial matters can sometimes be sensitive. However, to help us get a clear understanding of the LISA scheme, it would be helpful to learn about your knowledge of how it works.  The purpose of this study is to learn about why people use LISAs and their experiences of using the LISA.

Explain how HMRC will use the research: The research is being conducted on behalf of HMRC. The research findings will be used to improve HMRC’s understanding of how the scheme is used.

Explain confidentiality: This conversation is completely confidential, and the findings will be reported anonymously.

Explain voluntary participation: if you do not wish to answer any of the questions, that is fine, please let me know and we can move on. Similarly, if you wish to withdraw consent to take part at any time, or stop the discussion for any reason, then please let me know.

Conversation will be relaxed and informal. No right or wrong answers, just keen to hear what you think.

Explain independence of Ipsos and that everything shared will be treated anonymously. No identifying information will be included in report.

Explain GDPR conditions: Ipsos requires a legal basis to process your personal data. Ipsos’ legal basis for processing your data is your consent to take part in this research.

Consent to audio record: If you feel comfortable, we would like to make an audio recording of our conversation. If video call, add: We will not be making a video recording – just the audio. The recording will be used purely for note-taking and research purposes.

Recordings are stored securely, only accessible by the Ipsos research team, and are permanently destroyed two months after the completion of the report based on the data that we collect (should be around January 2024).

Length of the interview: the interview should take about 45 to 60 minutes.

Any questions before we begin?

Section 1: Background

Interviewer: this section of the guide introduces the participant to the research, builds rapport between the moderator and participant and gives the moderator information to probe on later in the interview. The moderator will ensure the participant feels comfortable enough to share details of their experiences.

Before we proceed, I’d like to mention that throughout this interview, I may refer to the Lifetime Individual Savings Account as ‘LISA’ or ‘the product’ or ‘the scheme’. Please note that ‘Lifetime ISA’ and ‘LISA’ refer to the same financial product. Let’s continue with the discussion, and please feel free to stop me at any point if you have any questions or need any clarification.

We will start with some general questions about your general financial situation and saving habits before moving onto the LISA more specifically.

• could you start by telling me what your main source of income is?
• if partner income/household income not mentioned: Additionally, if you’re comfortable sharing, could you also provide an estimate of your total household income? This includes the combined income of all people living in your home.
• are you employed or self-employed/both?
• what do you do for work?
• part time or full time?
• how would you describe your level of financial comfort?
• probe: If faced with a sudden unexpected expense (equivalent to a month’s salary), would you be able to cover it? How would you manage this situation?
• how would you describe your approach to personal savings?
• probe: Could you talk about when you started saving?
• probe: How regular are your savings? Do you follow a specific routine or pattern?
• probe: How would you rate your knowledge and understanding of personal finances?
• can you tell me about the various ways you save money? For instance, do you use a standard savings account or hold another type of ISA? How many different accounts do you have?
• probe: Have you ever considered building up savings in your current account?
• probe: Do you have any other investments that you consider a part of your savings strategy? (such as stocks, forex, cryptocurrency, commodities, ETF’s, property)
• probe: Do you prioritize saving over other spending? Why or why not?
• probe: How do you prioritize your savings among your other expenditures?

Now, I’d like to turn our focus to the LISA, specifically.

Section 2: Awareness of and experience with the scheme

Okay, now I want to wind back to the very start of the process. This might be going back a while now, but I’d be interested to know what the earliest part of the process of using your LISA was like for you, from what you remember.

Awareness:

• timing: roughly when did you first hear about the scheme?
• what else was happening in your life at that time? Probe to build context, for example any changes at work, in your family life, living situation?
• method: how did you first hear of the scheme? Where did you look to find out more about it?
• through the press, any television shows, or media personalities? If so, which ones? For example, Martin Lewis’s Money Show?
• on the Government website?
• via social media platforms such as Facebook, Twitter, or Instagram?
• from specific YouTube channels or influencers talking about the LISA?
• recommendations from friends or family members?
• information from financial advisors or banks?
• advertisements that caught your attention, such as billboards, radio ads, or online ads?
• through online blogs or financial advice websites?
• via newsletters or email alerts you subscribe to?
• informed about the scheme at your workplace? If so, who presented the information?
• during any seminars, webinars, or financial education sessions?
• opinion: what was your first impression?

Opening an account

• do you know what type of LISA you hold, such as cash, or stocks and shares?
• do you hold more than one LISA?
• if yes: are they all cash LISAs, stocks and shares LISAs, or a mix?
• probe: why did you choose these specific types?
• probe: how do you manage your investments across multiple LISAs?
• how long have you been using the LISA scheme (per live account)? When did you open the account(s)?
• was the process of setting up your account straightforward? Were there any difficulties experienced?
• how were these resolved?
• was your LISA provider helpful in answering your questions/solving your query?

Using the account

• have you encountered any difficulties while using your LISA account?
• if yes: could you elaborate on what these difficulties were and how they affected your experience?
• and were there any other problems or anything else about the scheme you think could be improved?
• what about tracking your account and keeping up to date with it? How did you do this? Online?
• probe: What was your experience of this? Similar/different to other online banking platforms?

Communication

• can you share any experiences of interacting or communicating with your LISA provider?
• were there any positive or negative interactions you could highlight?
• if any negative interaction mentioned: did this affect your perception of HMRC at all?
• if yes: how so?
• did this affect your perception of the LISA product at all?
• if yes: how so?
• could this have been handled better?
• if yes: how so?
• what difference would this have made to you?
• if any positive interaction mentioned: did this affect your perception of HMRC at all?
• if yes: how so?
• did this affect your perception of the LISA product at all?
• if yes: how so?

Section 3: Decision-making process and withdrawals

Motivation to save

• before you opened a LISA, what were your primary motivations or goals for saving money in general? For example, were you saving for a specific purpose like buying a house or planning for retirement?
• did you consider any other savings products or schemes before deciding on the LISA?
• if so, what were they and why did you ultimately choose the LISA?
• what was your financial situation like at the time when you decided to open a LISA? How did that impact your decision to choose this particular product?

Knowledge of LISA rules

• how much did you know about the LISA scheme before opening an account?
• were you aware of the rules and criteria around the use of your LISA product before you opened an account?
• how did you come to learn about these rules? Can you remember where you found this information?
• if no: do you feel more knowledgeable about the product now, compared to when you first opened the account?
• if yes: how did you come to understand these rules and regulations better? Can you remember if there were specific sources of information that helped you learn more about the product? (consult list above for info sources)
• from what you can remember, what were the main rules that stood out for you?

If examples are forthcoming, then follow-up: * what specifically about these rules made them memorable to you? * did you agree with this rule? Why/why not? * what made it appealing/unappealing? * in that case, would you say this was a reason that made you more/less likely to open an account at the time? * were there any other that were of particular concern? Why? * were there any rules that you did not understand?

Decision-making overall

• what were the main LISA features that attracted you to the product?
• which LISA features had the most influence on your decision? [Allow all spontaneous and then probe for those not mentioned]
• did you know about this? Provide brief explanatory stimulus.
• what do you think about this now that you are aware?

The government savings bonus

• were you aware of this? What do you know about it?

After their initial responses – clarify/read out: for every pound you pay into your LISA, up to a maximum of £4,000 a year, the government will add a 25% bonus to your savings, meaning a maximum of £1,000 bonus per year. The Lifetime ISA limit of £4,000 counts towards your annual ISA limit.

• how significant was this in your decision to open the LISA?
• what do you think about this feature?
• what do you think about the yearly subscription limit of £4,000 (the amount you can pay into your LISA)?
• what do you think about the yearly bonus being provided by the government?
• what makes you think that? [Especially if participant mentions being worried the bonus will reduce]
• the bonus is paid into your savings account on a monthly basis, rather than at the point of withdrawal.
• how, if at all, does this impact your confidence in the bonus?
• if the bonus were not paid until you withdrew money, how would this change how you use your account?

House buying requirements

• were you aware of these? What do you know about them?

After their initial responses - clarify/read out: You can use your savings to help you buy your first home if all the following apply: you are a first time buyer: the property costs £450,000 or less; you buy the property at least 12 months after you make your first payment into the Lifetime ISA; you use a conveyancer or solicitor to act for you in the purchase; you’re buying with a mortgage.

• how significant were any of these in your decision to open the LISA?
• what do you think about this feature? (If they comment on any of the features above)
• to what extent did the house price cap and annual deposit limit influence your decision on how to use your LISA?
• how?
• could you share how these specific aspects played a role in your decision-making process? [Especially if this/these meant they don’t use it to save for a house/whether made them consider other options to save for house]
• to what extent do the requirements (including the house price cap and annual deposit limit) influence the way in which you use the LISA? How?
• if the house price cap were removed or increased, would that influence the way you use the LISA? How?
• probe: would you save more?
• if not mentioned: what do you think about the requirement to be a first-time buyer? The requirement to use a mortgage? The requirement to use a conveyancer/solicitor?
• how important were these requirements in your decision on how to use your LISA?

The withdrawals process and withdrawal conditions

• do you feel as though you have a good understanding of the withdrawal process and withdrawal charges?
• could you please share with me your understanding of the withdrawal process and withdrawal charges associated with the LISA scheme?

After their initial responses – clarify/read out: So just to clarify, there are three ways customers can access money in their Lifetime ISA, including the bonus, without paying any withdrawal charge - customers pay a withdrawal charge if they take money out for any reason other than buying their first home, they reach the age of 60, or they are diagnosed with a terminal illness.

• were you aware of these details?
• how significant was this in your decision on whether to open a LISA?
• how important was the risk of losing money in your decision to open the LISA?
• what do you think about this?

I understand that discussing financial matters can sometimes be sensitive, and remember that you do not need to answer any questions that you don’t want to. However, to help us get a clear understanding of the LISA scheme, it would be helpful to learn about whether you’ve ever withdrawn money from your LISA and the reasons for this.

• have you ever withdrawn money from your LISA?
• why?

[Check answers from screener]

If participant made a withdrawal from LISA to purchase first house:

• could you share your experience of using your LISA for your first house purchase?
• how easy or difficult was the process?
• was it clear what you needed to tell your LISA manager/provider?
• how was the process of using a conveyancer with the LISA withdrawal? Any positive or negative interactions you could highlight?
• how was the process of making an “investor declaration”? Was it clear what you needed to provide your conveyancer? Any issues?
• any problems or difficulties in using the savings to contribute to your house purchase?
• how did you feel at the prospect of withdrawing? Were you worried at all?
• if the house purchase was delayed, did you experience any difficulties? What were they and how was this handled?
• to what extent did the LISA help you save for your first home purchase specifically?
• before withdrawing, did you ever consider withdrawing for something other than a house purchase?
• if any negative/positive interaction mentioned: did this affect your perception of them at all?
• if yes: how so?
• did this affect your perception of the LISA product at all?
• if yes: how so?
• if negative: could this have been handled better?
• if yes: how so?
• what difference would this have made to you?

If participant made a withdrawal from LISA for an unauthorised reason:

• if not mentioned spontaneously: can I just check, when you withdrew that money, were you charged the 25% withdrawal fee?
• do you know there was a reduced withdrawal charge for withdrawals during the COVID-19 pandemic?
• if yes: how did this impact your decision?
• if understanding of withdrawal charge was not clear: did you know that a withdrawal for a reason other than house purchase could incur a penalty?
• if yes: how did the potential charge impact your decision to withdraw money?
• if no: when and how did you find out about the withdrawal charge?
• how did it impact your decision?
• did you make any attempts to avoid the withdrawal charge?
• was LISA the last source of savings for you? Had you exhausted all other sources?
• how was the process of withdrawing? What was the communication like with your LISA provider after the early withdrawal?

If participant made a withdrawal from LISA and closed the LISA:

• I can see that you mentioned that you have since closed your LISA account. Why did you take the decision to close your LISA account?
• could you see yourself opening another LISA in the future?
• if now over 40: how do you feel about the age limit on the LISA?

If participant made a withdrawal from LISA and kept the LISA open:

• I can see that you mentioned that you still have your LISA account. If you were to withdraw again in the future, what would this likely be for?
• do you expect to continue saving into a LISA? Is this for the same or different reasons?
• are you likely to make another withdrawal? How long do you anticipate saving in the LISA before making another withdrawal?
• would you withdraw all of it or just some?

If participant has never made a withdrawal from LISA:

• do you have any plans for withdrawing from your LISA?
• have you decided what you will use your LISA savings towards? Are you using your LISA to save for a house, or for retirement, or both?
• how long to you anticipate saving in the LISA before withdrawing? Would you withdraw all of it or just some?
• are there any specific goals or timelines you have set for these plans?
• does the possibility of early withdrawal charge impact your decision to withdraw?
• are there any circumstances where you would withdraw money despite the withdrawal charges?

Ask all

• do you know why the withdrawal charge is in place?
• if no: if you were to guess, why do you think the charge exists?
• if yes: where did you find this information?
• what do you think about this withdrawal charge, in principle? Do you agree with it being in place? Why/why not?
• are there any improvements you would suggest for the withdrawal process?
• did the reduction in the withdrawal charge to 20% during the COVID period affect your decision-making around withdrawing?

Scenario-testing the withdrawal charge

Interviewer note: these scenarios are trying to tease out the nuance in how much they value a higher bonus vs. more flexibility in withdrawing. Is the 25% worth the lack of flexibility? Is that preferable to a lower bonus with more flexibility? Where is the sweet spot and how are these judgements made?

Clarify/read out (refer to separate prompt sheet): So just to clarify, the withdrawal charge of 25% is applied to a withdrawal beyond the government bonus of 25%. This is because, if you pay in £100, the 25% bonus leaves you with £125. The withdrawal charge of 25% is charged on that figure, which is £31.25, leaving you with £93.75 if you paid in £100 and withdrew early.

I’d like you to think about a hypothetical scenario where the withdrawal charge was reduced to 20%. As with the current LISA rules, in this scenario, the withdrawal charge would still only apply if you withdrew your savings for any reason other than to purchase your first home or for retirement. So, with a withdrawal charge of 20%, if you paid in £100 and withdrew your savings for reasons other than buying your first home or for retirement, you would still end up with £100.

• what are your initial thoughts on this?

If participant is unclear: so, in this scenario, if you withdrew from your LISA for reasons other than buying your first home or for retirement, you wouldn’t receive the government bonus. The withdrawal charge would still apply, but you would still be left with your original savings.

• how might this scenario impact how you save into your LISA?

Show stimulus (see separate document):

• would this change the amount you save into your LISA given the reduced withdrawal charge?
• how much more/less would you save into your LISA each month compared to currently, as a rough proportion or amount?
• would this reduction in the withdrawal charge change how you would feel about withdrawing money to buy a first home or for retirement? Why/why not?
• would this reduction in the withdrawal charge change how you would feel about withdrawing money for reasons other than buying a first home or for retirement? Why/why not?

I’d now like to explore your thoughts about other hypothetical changes to the government bonus on your savings. In the following scenarios, there is no withdrawal charge to withdraw LISA savings early, for example, for reasons other than buying a first home or for retirement.

Note: if participant closed their account after withdrawal, questions need to be phrased as ‘would you re-open a LISA’ rather than ‘would you still use the LISA’.

• if there was no withdrawal charge to withdraw LISA savings early, and the government bonus was 20% instead of 25%, would you still use the LISA to save for your first home or retirement? (If needed: if you saved £100, the government bonus would be £20 on top of this.)

• probe: why?

• probe: any other reflections on this scenario?

• if there was no withdrawal charge to withdraw LISA savings early, and the government bonus was 10% instead of 25%, would you still use the LISA to save for your first home or retirement? (If needed: if you saved £100, the government bonus would be £10 on top of this.)

• probe: why?

• probe: any other reflections on this scenario?

• if there was no withdrawal charge to withdraw LISA savings early, and the government bonus was 5% instead of 25%, would you still use the LISA to save for your first home or retirement? (If needed: if you saved £100, the government bonus would be £5 on top of this.)

• probe: why?

• probe: any other reflections on this scenario?

• unless already clear: if there was no withdrawal charge to withdraw LISA savings early, how high would the government bonus need to be for you to still use the LISA to save for your first home or retirement? (Participant can refer to % of their savings or to market interest rates.)

• would this be preferable to the current set up? Why/why not?
• would a reduction in the withdrawal charge and reduction in the government bonus change how you would feel about withdrawing money to buy a first home or for retirement? Why/why not?
• would a reduction in the withdrawal charge and reduction in the government bonus change how you would feel about withdrawing money for reasons other than buying a home or for retirement? Why/why not?
• any other reflections on these hypothetical scenarios?

Section 4: Reflections on saving behaviour and other considerations

• how, if at all, has your use of the LISA changed your savings behaviour? To what extent do you think the LISA has encouraged you to adopt a ‘saving habit’?
• how would you describe your personal saving behaviour now, compared to before you opened a LISA? Has it changed at all?
• do you feel that the LISA has helped you save more overall, for either your first home or for retirement? To what extent would you be able to save for (refer to participants’ previous answers) without the LISA? Please explain.
• if property mentioned: to what extent did the LISA act as a catalyst to get you saving for your first property? Would you have started saving without it?
• can you share any specific instances where LISA has directly facilitated your saving efforts?
• do you have any plans for changing your saving behaviour in the future?

Section 5: Wrap up

• the interview is almost at a close, and I’d just like to summarise the key points from our discussion.
• what, if anything, do you think works well with the Lifetime ISA?
• probe: and what difference did that make to you?
• and what, if anything, do you think could be improved with the way the Lifetime ISA works?
• probe: and what difference would that have made to you?
• what would you say to someone else who was considering opening a Lifetime ISA?
• are there any other parts of the process or experiences that we’ve not asked about that you’d like to share? Or anything else you’d like to say?

Thank participant for their time and input.

Explain next steps and gather incentive details.

Would you like the website address so you can access the privacy notice which will explain that your data will only be used for the purposes of this research, including a bit more detail about how it will be handled and stored securely?

If yes – do you have a pen and paper to hand? (Check that they have written this down correctly.)

HMRC may want us to pass back some anonymised transcripts of these interviews- would you be okay with us passing back a transcription of this interview, with all identifying information removed?

Thank participant and remind them of confidentiality. Remind them of their right to remove consent for their data to be used, which must be done Jan 2024. If needed: This is the date that all participant responses will be anonymised and aggregated into research findings, so it will not be possible to remove your specific responses after this date.

Explain that they can get in touch if they have any further comments or questions about the research. Remind them of the £60 charity donation/voucher from Ipsos, as an appreciation for their time and contribution to the research.

Discussion guide for interview with eligible non-holders

Introduction

Interviewer to introduce self & thank participant for taking part. Explain the purpose of the session/research.

Thank participant for taking part.

Introduce yourself and Ipsos: I am a researcher at a company called Ipsos, which is an independent research organisation. HMRC have commissioned us to conduct research into the Lifetime Savings ISA.

Explain the research: I understand that discussing financial matters can sometimes be sensitive. However, to help us get a clear understanding of the LISA scheme, it would be helpful to learn about your knowledge of how it works. The purpose of this study is to learn about why people use or do not use LISAs and how they interact with other savings products.

Explain how HMRC will use the research: The research is being conducted on behalf of HMRC.  The research findings will be used to improve HMRC’s understanding of how the scheme is used.

Explain confidentiality: this conversation is completely confidential, and the findings will be reported anonymously.

Explain voluntary participation: if you do not wish to answer any of the questions, that is fine, please let me know and we can move on. Similarly, if you wish to withdraw consent to take part at any time, or stop the discussion for any reason, then please let me know: Conversation will be relaxed and informal, No right or wrong answers, just keen to hear what you think and Explain independence of Ipsos and that everything shared will be treated anonymously, No identifying information will be included in report.

Explain GDPR conditions: Ipsos requires a legal basis to process your personal data. Ipsos’ legal basis for processing your data is your consent to take part in this research.

Consent to audio record: If you feel comfortable, we would like to make an audio recording of our conversation. If video call, add: we will not be making a video recording – just the audio. The recording will be used purely for notetaking and research purposes.  Recordings are stored securely, only accessible by the Ipsos research team, and are permanently destroyed two months after the completion of the report based on the data that we collect (should be around January 2024).

Length of the interview: the interview should take about 45 to 60 minutes.

Any questions before we begin?

Section 1: Background

Interviewer: this section of the guide introduces the participant to the research, builds rapport between the moderator and participant and gives the moderator information to probe on later in the interview. The moderator will ensure the participant feels comfortable enough to share details of their experiences.

Before we proceed, I’d like to mention that throughout this interview, I may refer to the Lifetime Individual Savings Account as ‘LISA’ or ‘the product’ or ‘the scheme’. Please note that ‘Lifetime ISA’ and ‘LISA’ refer to the same financial product. Let’s continue with the discussion, and please feel free to stop me at any point if you have any questions or need any clarification.

We will start with some general questions about your general financial situation and saving habits before moving onto the LISA more specifically.

• could you start by telling me what your main source of income is?
• if partner income/household income not mentioned: additionally, if you’re comfortable sharing, could you also provide an estimate of your total household income? This includes the combined income of all people living in your home.
• are you employed or self-employed/both?
• what do you do for work?
• part time or full time?
• how would you describe your level of financial comfort?
• probe: if faced with a sudden unexpected expense (equivalent to a month’s salary), would you be able to cover it? How would you manage this situation?
• how would you describe your approach to personal savings?
• probe: could you talk about when you started saving?
• probe: how regular are your savings? Do you follow a specific routine or pattern?
• probe: how would you rate your knowledge and understanding of personal finances?
• can you tell me about the various ways you save money? For instance, do you use a standard savings account or an ISA (not a LISA)? Do you have a single or multiple accounts?
• probe: have you ever considered building up savings in your current account?
• probe: do you have any other investments that you consider a part of your savings strategy? For example, stocks, forex, cryptocurrency, commodities, ETF’s, property.  * probe: do you prioritise saving over other spending? Why or why not?  * probe: how do you prioritise your savings among your other expenditures?
• are you familiar with any government-backed saving schemes?
• probe: can you mention a few?

Section 2: Awareness of the LISA

Now, I’d like to turn our focus to the LISA, specifically.

As a bit of background, the Lifetime ISA (LISA) is a type of savings account launched by the UK government in April 2017 to help people aged save for their first home or retirement. People aged 18 to 39 can open a LISA. The LISA allows individuals to save up to £4,000 per year and receive a 25% bonus from the government on their contributions until they reach the age of 50.

Awareness

• extent: how would you describe your awareness of the LISA scheme? On a scale from 1 to 10, where would you rate your understanding of the LISA scheme? (1 = not aware at all, 10 = fully aware)
• timing: roughly when did you first hear about the scheme?
• method: how did you first hear of the scheme? Where did you look to find out more about it?
• through any television shows or media personalities? If so, which ones? For example, Martin Lewis’s Money Show?
• on the Government website?
• via social media platforms such as Facebook, Twitter, or Instagram?
• from specific YouTube channels or influencers talking about the LISA?
• recommendations from friends or family members?
• information from financial advisors or banks?
• advertisements that caught your attention, such as billboards, radio ads, or online ads?
• through online blogs or financial advice websites?
• via newsletters or email alerts you subscribe to?
• informed about the scheme at your workplace? If so, who presented the information?
• during any seminars, webinars, or financial education sessions?
• opinion: What was your first impression?
• probe: Has your impression changed over time?
• if so, how?

Understanding

• how well would you say you understand the LISA product?
• probe: what source(s) have you used to gather this information?
• through any television shows or media personalities? If so, which ones? For example, Martin Lewis’s Money Show?
• on the Government website?
• via social media platforms such as Facebook, Twitter, or Instagram?
• from specific YouTube channels or influencers talking about the LISA?
• recommendations from friends or family members?
• information from financial advisors or banks?
• advertisements that caught your attention, such as billboards, radio ads, or online ads?
• through online blogs or financial advice websites?
• via newsletters or email alerts you subscribe to?
• informed about the scheme at your workplace? If so, who presented the information?
• during any seminars, webinars, or financial education sessions?
• where would you expect to find information on the LISA product?
• probe: do you feel the information you’ve found about LISA was clear and comprehensive?
• probe: were there areas you found confusing or felt were not adequately explained?
• do you feel more knowledgeable about the LISA product now, compared to when you first heard about it?
• if yes: how did you come to understand product better? (see list of info sources above)
• how well would you say you understand the rules and criteria surrounding the LISA product?
• probe: what source(s) have you used to gather this information?
• do you feel more knowledgeable about the rules and regulations surrounding the LISA product now, compared to when you first heard about it?
• if yes: how did you come to understand these rules and regulations better?
• from what you can remember, what were the main rules that stood out for you?

If examples are forthcoming, then follow-up:

• what specifically about these rules made the standout?
• did you agree with this rule? Why/why not?
• in that case, would you say this was a reason that made you more or less likely to open an account at the time?
• were there any other rules that concerned you? If yes: What were they and why?

Motivations

• is there anything that you find attractive about the LISA as a savings product?

• if mentioned that they save elsewhere (not a LISA): you said that you save with (interviewer to recall savings product mentioned). Why did you ultimately choose to save in this way rather than with a LISA? What made this/them more attractive than the LISA?

If have active non-LISA savings account(s):

• what was your financial situation like at the time when you decided to open this account? How did that impact your decision to choose this particular product over the LISA?
• in terms of your financial planning, how did you see this account fitting into your overall strategy? What role did it play in your broader savings or investment approach?
• do you use a specific savings product to save for retirement?
• what is this?
• do you see it as having any advantages or disadvantages compared to using a LISA?
• do you own a house? (Check from screener)
• if yes: how did you save to buy your first home?
• if no: are you using a specific savings product to save for your first home?
• do you see it as having any advantages or disadvantages compared to using a LISA?

Section 3: Decision-making process and withdrawals

Decision-making

• could you explain your reasons for not opening a LISA?
• if because they already own a house: and why did you not want to use the LISA for retirement savings?
• which factors influenced your decision to not open a LISA? Allow all spontaneous and then probe for those not mentioned.
• probe: were there specific features of the LISA that deterred you? Can you explain?

If not mentioned, probe on the following:

The government savings bonus

• were you aware of this? What do you know about it?

After their initial response – clarify/read out: for every pound you pay into your LISA, up to a maximum of £4,000 a year, the government will add a 25% bonus to your savings, meaning a maximum of £1,000 bonus per year. The Lifetime ISA limit of £4,000 counts towards your annual ISA limit.

• how significant was this in your decision on whether to use the LISA?
• what do you think about this feature?
• what do you think about the yearly bonus limit?
• what do you think about the yearly bonus being provided by the government?
• do you have any concerns about government backed schemes? If yes: what are these and why do you think that?

House buying requirements

• were you aware of these? What do you know about them?

After their initial response – clarify/read out: you can use your savings to help you buy your first home if all of the following apply: you are a first time buyer; the property costs £450,000 or less; you buy the property at least 12 months after you make your first payment into the Lifetime ISA; you use a conveyancer or solicitor to act for you in the purchase; you’re buying with a mortgage.

• how significant were any of these in your decision to open the LISA?
• what do you think about this feature? (If they comment on any of the features above.)
• to what extent did the house price cap and annual deposit limit influence your decision to not open a LISA?
• how?
• could you share how these specific aspects played a role in your decision-making process? (Especially if this/these meant they have not opened a LISA to save for a house or made them consider other options to save for house.)
• if the house price cap were removed or increased: would that influence your thoughts on potentially having a LISA? How?
• probe: would you save more?
• if not mentioned: What do you think about the requirement to be a first-time buyer?
• what do you think about the requirement to use a mortgage?
• what do you think about the requirement to use a conveyancer/solicitor?
• how important were they in your decision on whether to open a LISA?

The withdrawals process and withdrawal conditions

• could you please share with me your understanding of the withdrawal process and withdrawal charges associated with the LISA scheme?

After their initial response – clarify/read out: there are three ways customers can access money in their Lifetime ISA, including the bonus, without paying any withdrawal charge. Customers pay a withdrawal charge if they take money out for any reason other than: buying their first home; they reach the age of 60; they are diagnosed with a terminal illness.

• how significant was this in your decision not to open a LISA? What do you think about this?
• if the withdrawal charge reduced, would that influence your decision not to open a LISA?
• did the early withdrawal charges influence your decision not to open a LISA?
• how? 
• could you share how this specific aspect played a role in your decision-making process?
• how important was the risk of losing money due to the withdrawal charges in your decision making?
• do you know why the withdrawal charges are in place?
• if no: if you were to guess, why do you think the charges exist?
• if yes: where did you find this information?
• what do you think about these withdrawal charges, in principle? Do you agree with them being in place? Why/why not?

Scenario-testing the withdrawal charge

Interviewer note: these scenarios are trying to tease out the nuance in how much they value a higher bonus vs. more flexibility in withdrawing. Is the 25% worth the lack of flexibility? Is that preferable to a lower bonus with more flexibility? Where is the sweet spot and what plays into these judgements?

Clarify/read out (refer to separate prompt sheet): so just to clarify, the withdrawal charge of 25% is applied to a withdrawal beyond the government bonus of 25%. This is because, if you pay in £100, the 25% bonus leaves you with £125. The withdrawal charge of 25% is charged on that figure, which is £31.25, leaving you with £93.75 if you paid in £100 and withdrew early.

I’d like you to think about a hypothetical scenario where the withdrawal charge was reduced to 20%. As with the current LISA rules, in this scenario, the withdrawal charge would still only apply if you withdrew your savings for any reason other than to purchase your first home or for retirement. So, with a withdrawal charge of 20%, if you paid in £100 and withdrew your savings for reasons other than buying your first home or for retirement, you would still end up with £100.

If participant is unclear: so, in this scenario, if you withdrew from your LISA for reasons other than buying your first home or for retirement, you wouldn’t receive the government bonus. The withdrawal charge would still apply, but you would still be left with your original savings.

Show stimulus (see separate document).

• what are your initial thoughts on this?
• how would this impact your likelihood of opening a LISA?
• why? What makes you say that?
• would this reduction in the withdrawal charge change how you would feel opening a LISA to save for a first home or for retirement? Why/why not?
• would these hypothetical changes impact your broader financial planning?

I’d now like to explore your thoughts about hypothetical changes to the government bonus on LISA savings. In the following scenarios, there is no withdrawal charge to withdraw LISA savings early, such as for reasons other than buying a first home or for retirement.

If there was no withdrawal charge to withdraw LISA savings early, and the government bonus was 20% instead of 25%, would you open a LISA to save for your first home or retirement? (If needed: if you saved £100, the government bonus would be £20 on top of this.)

• probe: why?
• probe: any other reflections on this scenario?

If there was no withdrawal charge to withdraw LISA savings early, and the government bonus was 10% instead of 25%, would you open a LISA to save for your first home or retirement? (If needed: If you saved £100, the government bonus would be £10 on top of this.)

• probe: why?
• probe: any other reflections on this scenario?

If there was no withdrawal charge to withdraw LISA savings early, and the government bonus was 5% instead of 25%, would you open a LISA to save for your first home or retirement? (If needed: if you saved £100, the government bonus would be £5 on top of this.)

• probe: why?
• probe: any other reflections on this scenario?

Unless already clear: if there was no withdrawal charge to withdraw LISA savings early, how high would the government bonus need to be for you to open a LISA to save for your first home or retirement? (Participant can refer to % of their savings or to market interest rates.)

• would this be preferable to the current set up? Why/why not?
• any other reflections on these hypothetical scenarios?

Can you provide a comparison between LISA and your other savings products in terms of features and benefits?

Section 4: Reflections on saving behaviour and other considerations

We’re now going to speak a little bit hypothetically about your personal financial situation. So, I’d like you to imagine that you had an active LISA…

• how do you think the LISA would affect your saving behaviour, if at all?
• would the bonus encourage you to save more than you do now?
• one of the aims of the LISA is to enable savings for a home– to what extent would this be a primary motivation for you to use any LISA in future? Why/why not?
• one of the aims of the LISA is to enable savings for retirement – to what extent would this be a primary motivation for you to use any LISA in future? Why/why not?
• do you feel that the LISA is something that could help you save more overall?
• and what about for either your first home or for retirement?
• what is your perception of the government bonus provided in the LISA scheme?
• probe: how does it compare to other benefits provided by your current savings product(s)?
• did you feel that you needed to seek advice on your decision-making process around savings products? Why/why not?
• and have you felt a need to seek financial advice in your decision-making process around savings products?
• if yes: probe: was there a particular reason(s) for this?
• probe: what was your experience of seeking and receiving financial advice?
• probe: what type of advisors did you use?
• probe: what advice were you given about LISA from financial advisors?
• if no: is there a particular reason(s) why not?
• do you have any plans for changing your saving behaviour in the future?
• probe: what might influence these changes?

Section 5: Wrap up

The interview is almost at a close, and I’d just like to summarise the key points from our discussion.

• what, if anything, do you think could be improved with the way the Lifetime ISA works?
• probe: and what difference would that have made in your decision to open a LISA?
• what changes, if any, would you make to the Lifetime ISA to make it more beneficial/useful/interesting to you?
• probe: can you provide reasons why you think these improvements would be beneficial?
• are there any other parts of the process or experiences that we’ve not asked about that you’d like to share? Or anything else you’d like to say?

Thank participant for their time and input.

Explain next steps and gather incentive details.

Would you like the website address so you can access the Privacy Notice which will explain that your data will only be used for the purposes of this research, including a bit more detail about how it will be handled and stored securely?

GDPR reminders and incentives:

HMRC may want us to pass back some anonymised transcripts of these interviews- would you be okay with us passing back a transcription of this interview, with all identifying information removed?

Thank participant and remind them of confidentiality. Remind them of their right to remove consent for their data to be used, which must be done before January 2024. If needed: this is the date that all participant responses will be anonymised and aggregated into research findings, so it will not be possible to remove your specific responses after this date.

Explain that they can get in touch if they have any further comments or questions about the research.

Remind them of the £60 donation/voucher from Ipsos, as an appreciation for their time and contribution to the research

10.4 Stimulus material used in the interviews

LISA withdrawal charge scenario

Currently the withdrawal charge of 25% penalises a withdrawal beyond the bonus of 25%. This is because if you pay in £100, the 25% bonus leaves you with £125. If you withdraw the whole amount the withdrawal charge of 25% is charged on the £125, which is £31.25, leaving you with £93.75.

I’d like you to think about the scenario where the withdrawal charge was reduced to 20%, so that if you paid in £100 you would end up with £100 even if you withdrew early.

Please note: mathematical content to follow.

Current LISA withdrawal charge of 25%

• amount paid into a LISA: £100
• amount after bonus (add 25%): £100 + (£100 × 25%) = £125
• withdrawal charge: £125 × 25% = £31.25
• amount after withdrawal charge: £125 – £31.25 = £93.75
• amount you get back if you make an unauthorised withdrawal: £93.75

Hypothetical LISA withdrawal charge of 20%

• amount paid into a LISA: £100
• amount after bonus (add 25%): £100 + (£100 × 25%) = £125
• withdrawal charge: £125 × 20% = £25
• amount after withdrawal charge: £125 – £25 = £100
• amount you get back if you make an unauthorised withdrawal: £100