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FCA wants risk warnings on Lifetime Isas

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The FCA wants savers into Lifetime Isas to receive risk warnings about penalty charges and opting out of auto-enrolment amid concerns about how the product will work in practice.

The regulator has published a consultation paper today on the rules governing the promotion and distribution of Lifetime Isas, which are due to launch in April.

Lifetime Isas allow savers to pay in up to £4,000 a year, with a 25 per cent Government bonus on contributions. Funds can be used to buy a first home worth up to £450,000, or can be accessed from age 60 or in the event of terminal illness.

Withdrawals for any other purpose will attract a penalty charge of 25 per cent on the whole fund, including any growth. A growing number of industry voices have been vocal in their criticism over the way the exit charges are applied.

The FCA says because the Lifetime Isa combines short to medium-term savings with long-term investments, as well as the early exit charge, it presents risks to its objective of consumer protection.

The FCA says: “Investors will need information about how a Lifetime Isa works, for example, eligibility, Government bonus, early withdrawal charge, etc.

“We believe investors in Lifetime Isas that include a relevant investment should also receive specific risk warnings in respect of:

  • incurring the early withdrawal charge which may mean that they receive less from their Lifetime Isa than they paid in, and
  • potentially losing an employer contribution to a workplace pension for which they may be eligible, where they choose to open a Lifetime Isa instead.”

Firms will have to remind savers about holding an appropriate mix of assets. They will also have to offer a 30-day cancellation period when a Lifetime Isa is opened.

The FCA has also proposed savers should be shown a projection table estimating what they can expect to get back from their Lifetime Isa at age 60, taking into account the bonus, specified returns, and inflation.

The consultation closes on 25 January.



Labour MP: Make advice on Lifetime Isa compulsory

A senior Treasury official has dismissed calls to make individuals take financial advice before enrolling in the new Lifetime Isa. In a Public Bill Committee meeting yesterday, MPs debated new clauses tabled for the legislation that will introduce the Lifetime Isa – the Savings (Government Contributions) Bill. One of the proposed clauses would place a duty on the […]


Lifetime Isa take-up to hit 200,000 in first year

More than 200,000 people are expected to save into a Lifetime ISA in 2017/18, according to the Treasury. In an impact assessment published today on the Treasury’s “help to save” initiatives, it is estimated that by the 2020 and 2021 tax years more than 800,000 people will be contributing to Lifetime Isas. A Treasury impact assessment says: […]


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. So that’s another 20 pages to read

  2. Wasn’t there a call for financial products that are simple and easy (for the public) to understand?

  3. I don’t get what is so difficult to understand.

    If you are OK with “locking” your money away in return for a good return on your investment for a first time property purchase then this is the ideal product for young savers.

    IF however, you feel you need to make withdrawals from your savings for life’s little emergencies then this account is not for you, there are other ISA options available to you.

    If you are thinking of this as a pension, think again! There are better options out there.

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