100,000 savers 'clobbered' with £755 charge for withdrawing their own money

Lifetime ISA (LISA) holders have been charged penalties of £755 each on average, according to new figures and data.

100,000 savers have been "clobbered" by taking their own money out of special bank account for first-time buyers. Lifetime ISA (LISA) holders have been charged penalties of £755 each on average, according to new figures and data.

The total value of LISA withdrawal charges hit £75.2 million in 2023 to 2024 after 99,650 people made unauthorised withdrawals. If you withdraw your savings for any other reason than buying your first home, you'll pay a 25 per cent "unauthorised withdrawal" penalty.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "The Lifetime ISA is proving hugely useful with almost 57,000 people using one to help them get that all-important first step on the housing ladder in 2023/24.

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"However, there’s massive room for improvement as around 100,000 people made an unauthorised withdrawal from their LISA during the same period and got clobbered with a withdrawal penalty. Reducing the exit penalty from 25% to 20% would ensure that only the effect of the government bonus is removed rather than your own money and encourage more people to use a LISA for retirement safe in the knowledge that they won't lose any of their own money should they need to access it early in a time of need."

Stuart Cheetham, chief executive at MPowered Mortgages previously told The Sun: "LISAs were created to help first-time buyers save up to buy a home, but thousands of savers are being unfairly penalised each year for doing just this.

"The cap on the value of a property they can be used for means LISAs are increasingly unfit for purpose." The government explains: "You can withdraw money from your ISA if you’re buying your first home, aged 60 or over or terminally ill, with less than 12 months to live.

"You’ll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason (also known as making an unauthorised withdrawal). This recovers the government bonus you received on your original savings."