We have written a few articles on the Lifetime ISA since the government announced the scheme would launch next April. But is all as it seems?
The scheme has been under fire in the media recently for the high early exit penalties it imposes. As the government has just capped exit penalties on pensions, it seems strange that they would impose them on another method of saving for retirement. Is this a case of give with one hand and take with the other?
As you are probably aware, the Lifetime ISA is for the under 40s, and provides a way to save for either a first property or future retirement. But it is essential to be absolutely sure that you will not need to access the money invested in this account early, as there is a hefty 5% fine for early withdrawal, or withdrawal for a purpose other than purchase of a first property or retirement.
Nationwide has rejected the scheme because of the large exit penalties. This is surprising, as Nationwide is the largest high street ISA supplier and this is certainly a setback for those in support of the scheme. There are reports that a requirement to seek financial advice before a Lifetime ISA can be taken out may be introduced.
Certainly, this is a scheme that may not be for everyone. If you are considering it and aren’t completely sure, please get in touch.