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Lifetime Isa savers whose incomes have been affected by coronavirus will no longer be hit with an exit penalty for accessing their cash early.
The Lifetime Isa was launched to help young people save for their first home or towards their retirement. Savers receive a 25pc bonus of up to £1,000 each year from the Government when they deposit money into a Lifetime Isa.
However, the scheme has been criticised for its hefty penalties for customers withdrawing money from their account for any other reason. They are hit with an effective 6.25pc penalty, meaning savers could lose thousands of pounds if they need to use cash for other purposes.
With many savers facing severe financial pressure because of the coronavirus outbreak, the Treasury has announced that the exit penalty will be waived for the current tax year. Savers will only be forced to return the Government bonus, rather than handing over any of their own cash.
Both cash and stocks and shares versions of the Lifetime Isa are available. Those investing in the stock market will still have to bear any investment losses they may have made.
Savers will be able to withdraw cash without penalty until April 5 2021. The new rules have been backdated to March 6 2020, meaning savers who have accessed funds since the start of the outbreak will have their penalty refunded.
John Glen, the Economic Secretary to the Treasury, said: “We know that some people are experiencing financial difficulties during these unprecedented times and we want to make it as easy as possible for people to access their savings, especially if it helps them avoid falling into high cost or unmanageable debt.
“That’s why we are reducing the withdrawal charge for Lifetime Isas, so people can access their funds to help get them back on their feet.”
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