New data obtained from HM Revenue & Customs (HMRC) has shown that Lifetime Isa (LISA) savers have been charged more than £9 million in penalties for accessing their accounts since 2018.
According to a Freedom of Information Request, withdrawal charges were first applied in 2018/19 and a total of £4.35 million was paid to HMRC in that year alone.
In the following year, the charges increased and HMRC recovered £4.69 million in penalties over the first seven months of 2019/20.
Introduced in April 2017, LISAs allow those under 40 to deposit up to £4,000 a year towards a home deposit or retirement savings with a Government bonus of 25 per cent added to the amount deposited.
If savers attempt to access their money either before they buy their first home or they reach the age of 60 they will lose the government bonus and face a 25 per cent penalty charge. Savers can also access their funds without penalty if they are terminally ill, with less than 12 months to live.
As an example, if you were to deposit £4,000 in a year you would receive the Government bonus of £1,000 for that year if you used the funds for one of the agreed reasons.
However, if you withdraw the money for any other reason you would lose £1,000 from the money saved in penalty charges and it would lead to the loss of the bonus.
Following the closure of the Help to Buy ISA last year, the LISA is now the only Government-backed savings product designed to help people save for a home deposit and so it remains popular, but savers should be aware of the penalties they face.
Link: Lifetime ISA