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Govt scraps Lifetime Isa exit charge for 2017/18

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The Government will scrap the Lifetime Isa’s 25 per cent exit charge in its first year.

Speaking in a House of Commons debate, financial secretary to the Treasury Jane Ellison said that the Government had decided to waive the charge for 2017/18 because people could be charged the exit fees before they receive their first Government bonus on the product.

After the 2017/18 a 25 per cent exit charge, including on growth, will still apply however.

Ellison told MPs: “The 25 per cent Government charge on unauthorised withdrawals from the Lifetime Isa recoups the Government bonus and applies a small additional charge. This is fair as it reflects the long-term nature of the product and ensures that individuals save into it for the intended purposes, protecting Government funds and taxpayers’ money.

“However, in 2017/18 only, the bonus will not be paid monthly, as it will be from April 2018 on, but will be paid as an annual bonus at year-end. This could create a difficult case where people face a 25 per cent Government charge up to 12 months before they receive the bonus. We have listened to representations on this point, and so, to improve the product for consumers, I can confirm that there will be no Government charges in 2017/18.”

The Government has defeatedt an amendment to delay the legislation however and will not mandate Lifetime Isa savers take financial advice.

Ellison said: “We have been very clear that we do not expect Lifetime ISAs to drive opt-outs from pension saving. There is, therefore, no reason to delay. In fact, such a delay would disadvantage those who wish to open a Lifetime Isa and who have been preparing for a 2017 launch.”

The Lifetime Isa is due to launch next April. UK residents aged between 18 and 40 will be able to open a Lifetime ISA and pay in up to £4,000 each tax year with contributions qualifying for a 25 per cent Government bonus.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. We’re going to need a bigger fag packet.

  2. What a waste of energy this ‘LI(e)SA is. MORE complicated than pensions less Govt extra money if HRT payer, penalties on growth, restricted access, a nightmare scenario from Govt, again!

  3. Could be a bigger damp squib than Stakeholder pension

  4. Still want to know if there is grounds for age discrimination with this product. Certainly worth a challenge as it seemingly offers no defence

  5. Don’t be so negative, you agree to purchase your first property now, by the time the legal system has delivered you through the system you are looking at a April completion, pay £ 4,000 in on 5/4 and withdraw £5,000 post to finalise the transaction, if below 40!

  6. Waste of time. Why not just allow people under the age of 40 access to up to £10,000 of their pension fund without a tax charge for their first home purchase?

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