Lifetime Isa users can access cash early as fees cut due to coronavirus crisis

PEOPLE who want to withdraw money from their Lifetime Isa early because their finances have been hit by coronavirus will see reduced fees for doing so.

The Treasury has announced a temporary rule change which means people will get back their full original investment.

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Because the Lifetime Isa is intended to help people save for their first home or for retirement it has had strict withdrawal rules.

If you want to access the money early or for something other than its specific purposes, you would normally be charged 25 per cent of the amount withdrawn - including any bonus earned - which is supposed to put people off doing so.

Savers receive a 25 per cent monthly bonus from the government on up to £4,000 of their cash each year through the Lifetime Isa scheme.

Now, thanks to the rule change, anyone who takes money out between March 6, 2020 and April 5, 2021 will only pay back this bonus, not any extra fees on top.

So if you put in the maximum of £4,000, you would have received a bonus of £1,000, giving you a total of £5,000.

Normally, withdrawing that £5,000 would have resulted in a 25 per cent payment of £1,250, leaving you with £3,750 - less than you put in to start with.

But the Treasury has now set the charge at 20 per cent, meaning you would pay back £1,000, and your original £4,000 is in tact.

Savers will still, however, be liable for any losses incurred through a stocks and shares Lifetime Isa, which can decrease in value depending on how well companies are doing.

The rule change will be backdated, so anyone who has taken money out since March 6 will have the difference refunded.

The Treasury said HMRC would work with Lifetime Isa providers to ensure that people would be refunded automatically.

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