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.
In a statement today (May 1) HM Treasury announced 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Early access to the Lifetime Isa usually incurs a 25 per cent charge on the amount withdrawn, a rule intended to stop people from using the funds for a purpose other than buying a house or saving for later life.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 temporary rule announced today 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.
Carol Knight, chief operating officer at Tisa, said the rule change was a "fantastic step" which would make a significant difference to savers hoping to access savings during the coronavirus pandemic.
Ms Knight added: “We have worked closely with the Treasury and HMRC during this crisis to work out how best to help people that may be struggling and we fully support this temporary solution which allows savers to access their funds without being penalised."
What do you think about the issues raised by this story? Email us on firstname.lastname@example.org to let us know.