Individuals paying into Lifetime ISA 'could get less out than put in'

01 Jul 2025

MPs have warned that some people who pay into a Lifetime ISA might get less out than they put in.

The Treasury Committee found that if Lifetime ISA funds are withdrawn early as a result of unforeseen circumstances, charges could mean that individuals could lose 6.25% of their savings.

A Lifetime ISA is available for adults under the age of 40. Individuals are able to contribute up to £4,000 per year and receive a 25% bonus (up to £1,000) on the contributions from the government, up until the age of 50. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account, and can be withdrawn from age 60 completely tax-free.

The Treasury Committee has been analysing whether the Lifetime ISA is fit for purpose and has called for it to be reformed.

Dame Meg Hillier, Chair of the Committee, said: 'We are still awaiting further data that may shed some light on who exactly the product is helping.

'What we already know, though, is that the Lifetime ISA needs to be reformed before it can genuinely be described as a market-leading savings product for both prospective homebuyers and those who want to start saving for their retirement at a young age.'

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