10 Dec 2020

Lifetime ISA Penalty ‘temporarily’ lifted

Whenever you invest you always have in mind why you are investing and what you wish that money to deliver to you.

For people saving for their first home, using a Lifetime ISA can reap huge rewards, as it is a Cash or Investment ISA that benefits from the Government topping up the amount saved by a further 20%.

However, there is a real sting in the tail if the Lifetime ISA isn’t used for the purpose it’s intended for, and if the saver/investor wishes to access the capital in the Lifetime ISA for any purpose other than buying their first home or when they retire, the Government want to take their bonus 20% back PLUS a further 5%. This means the savers actually get back less than what they put in.

Given the extraordinary circumstances we are in, some people are looking to their savings and investments to help them through financially, so, the Government have waived their penalty and will not charge the additional 5% penalty for any withdrawals made between 6th March 2020 and April 5, 2021.

We should always encourage longer term saving, and especially for those younger people trying to get on to the housing ladder. However, sometimes plans do change, and the fact that a penalty ever applied was always harsh. I hope, along with many of my counterparts, that this penalty will go for good.