There will be no 5% exit charge on the Lifetime ISA for the first 12 months the product is available.
From April 2017, the Lifetime ISA will be available for adults under the age for 40. Individuals will be able to contribute up to £4,000 per year and will receive a 25% government bonus.
Savers using the scheme can withdraw their money to purchase a first home from the age 60 after the first year.
If funds are withdrawn for other purposes, the 25% bonus will be lost and a 5% exit charge will be applied.
In a House of Commons debate, Jane Ellison, financial secretary to the Treasury said the decision to remove the charge for the first year was due to the fact that savers will receive the 25% government bonus at the end of the 2017/18 tax year rather than being paid monthly.
“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% 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.”
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