The government has temporarily changed its rules surrounding Lifetime ISAs in a bid to help those who want to access funds early in light of the coronavirus outbreak.
HM Treasury announced that individuals whose income had been affected by the pandemic would no longer be charged an additional withdrawal fee if accessing funds early.
The Lifetime ISA sees the government offer a 25 per cent bonus on up to £4,000 of savings each year, with the scheme intended to help younger people save for their first home or retirement.
Early access usually incurs a 25 per cent charge on the amount withdrawn, a rule intended to stop people from using the funds for a purpose other than buying a house or saving for later life.
But under the new temporary rule, the charge on unauthorised withdrawals will be reduced to 20 per cent for the period between March 6, 2020, and April 5, 2021.
This means account holders will only pay back any government bonus they have received and not the additional withdrawal charge of 5 per cent.
The move means savers will get back all the money they originally put into the Lifetime ISA, subject to any investment losses incurred on stocks and shares.
John Glen, 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.”
The rule change will be backdated to March 6, meaning anyone who withdrew money early since then and paid a 25 per cent charge will have the difference refunded by the government.
To speak to an adviser, contact us on 0191 384 1008.