Overview

• The Lifetime ISA imposes a 25% penalty on non-qualifying withdrawals, which can result in savers losing more than their government bonus, including part of their own contributions.
• A saver withdrawing early after contributing £4,000 and receiving a £1,000 bonus would lose £1,250, ending up with only £3,750.
• Financial experts, including Rachael Griffin of Quilter, have criticized the penalty as 'unfair' and called for its reduction to 20% to alleviate losses.
• Since 2018, approximately 227,000 people have used the scheme to purchase property, utilizing over £3 billion in savings.
• The scheme, introduced in 2016 to aid under-40s in saving for homes and retirement, has faced scrutiny for its restrictive rules and widespread consumer misunderstanding.