Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether she has made an assessment of the potential merits of updating guidance on the lifetime ISA scheme to clarify the cost of early withdrawal penalties.

The Lifetime ISA supports younger people saving for their first home or later life by offering a generous government bonus on up to £4,000 of savings each year. These funds, including the government bonus, can be used to purchase a first home up to the value of £450,000, in the case of terminal illness or from age 60.

Any other withdrawals are subject to a 25% charge on the amount withdrawn. This recoups the government bonus, any interest or growth arising, and a proportion of the individual’s subscriptions to discourage such withdrawals and protect the long-term nature of the account.

While the Government’s website ‘gov.uk’ already explains the rules behind the Lifetime ISA, and includes a worked example of the withdrawal charge, we will consider whether any improvements can be made to that guidance.

Lifetime ISA managers also have a responsibility for ensuring that communications with their customers are clear and concise as part of consumer duty requirements. As part of that communication the manager will normally provide details of the scheme, including the rules around withdrawing funds, whether any charge applies and how that charge is calculated.