Lifetime ISA withdrawal penalty reduced due to Coronavirus

The Treasury has announced a temporary reduction in the charge applied to non-eligible withdrawals from a lifetime ISA (LISA) with effect from 6 March 2020 to 5 April 2021. Non-eligible withdrawals are those made before age 60 except where in connection with a first home purchase, serious ill-health or the death of the LISA holder. This reduction is being made to stop savers who require access to the funds during the Covid-19 crisis from being penalised.

The 25% charge is to be reduced to 20% which means that there is no real exit fee on these withdrawals. While the charge was 25% it represented a real 6.25% exit fee when set against the 25% bonus paid on subscriptions.

All non eligible withdrawals made since 6 March 2020, to which a 25% charge has been applied, will have the difference between this amount and the amount that would have been paid under the revised 20% charge refunded.

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