HM Revenue and Customs has so far charged young people more than £9m in penalties for taking money out of a Lifetime Isa, according to data obtained through a freedom of information request.
The data, obtained by Royal London, covered the whole of 2018-19 and the first seven months of 2019-20.
The Lisa was launched in 2017 to help younger people save for a pension or buy their first home by offering a 25 per cent annual government bonus.
But those who access the money in their Lisa before the age of 60 for a reason other than a house deposit have to hand back the government top-up and face an additional penalty charge on any withdrawals.
The first withdrawal charges were levied in 2018-19 and a total of £4.35m was paid to HMRC in that year.
The pace of charges increased the following year with a further £4.69m paid in just the first seven months of 2019-20.
Steve Webb, director of policy at Royal London, said: "A Lifetime Isa can be attractive for those who are clear about their plans to put down a deposit on a house and who are confident that they won’t need the money for any other reason.
"But these figures are a stark reminder that things can change. People who change their plans after saving in a Lisa are finding that not only do they have to pay back the government top-up but they face a penalty charge as well.
"This leaves them with less money than they started with. It is hard to see why the government should fine people whose only ‘crime’ was to put money aside in the hope of buying a home and then see their circumstances change."
damian.fantato@ft.com
