'I've been punished for withdrawing money from my lifetime Isa'
Rubal brings over 20 years of experience in advising clients, specialising in investments, but also has a detailed knowledge about pensions, scams and general banking.
I’ve been paying into a lifetime Isa for many years. This year, due to an emergency, I needed to withdraw some of the money.
I gave my bank the instruction, but found that I have been penalised and that I’ll get back less than I originally invested.
Is that right?
A Which? Money member
'Those considering a lifetime Isa need to take care'
Rubal Channa, Which? money expert, says…
This is the major drawback to lifetime Isas.
Their main appeal is that for every pound you put in, the government adds another 25p. You can contribute up to £4,000 a year. Plus, all interest or investment growth is tax-free.
A penalty of 25% is applied if you withdraw the money under the age of 60 for any purpose other than buying your first home (worth up to £450,000) or due to terminal illness.
This means that you lose more than just the government bonus – you also lose 6.25% of your own money.
You lose more than just the government bonus – you also lose 6.25% of your own money
If your money had grown by more than 6.25% through interest or investment growth, you might still get out more than you originally put in.
Other readers who hold a lifetime Isa should consider holding separate emergency funds in an instant-access cash Isa.
Which? Money 1-to-1 guidance
Our team of money experts can answer your questions big and small, on topics from pensions to tax and savings to scams.
They're impartial so they don’t give regulated financial advice or recommend particular products or providers – they’re here to support you and to help you make more confident financial decisions in these areas and more:
Which? Money members and their immediate family get unlimited access to 1-to-1 guidance sessions.
If you're a Which? Money member, you can book an appointment online. If you're not, you can find out more about membership.
