Martin Lewis warns people face 'government fine' for 'withdrawing own money'
Martin Lewis has urged the government to change "unjust" Lifetime ISA rules. The BBC and ITV star and his Money Saving Expert team have explained first-time buyers paid the Labour Party government an estimated £1.8 million in fines for taking money out of their Lifetime ISAs (LISAs).
Mr Lewis is renewing calls to the Government to stop those who are using LISA savings for their intended purpose – buying a first-time property – having to pay these unjust penalties. First-time buyers using LISAs paid the state £1.8 million in fines last year.
Martin said: "Many people, especially in London and the Southeast, and other urban metropolitan areas, have been priced out by house prices going up. So they saved – as the Government told them to – for their first-time property, but their property is now above £450,000. To take the money out, even to buy a first-time property, which is what this product is for, they are facing a penalty, a substantial penalty.
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"There is a justice issue here. Many of our young people who've done what the state asked them to by saving for a first-time property in a Lifetime ISA are being fined by the state for accessing the money to do what the state wanted them to do. That seems to me to be unjust."
One saver who has started putting her money in a top savings account has spoken to MSE. Verity said: "The Government's 25% LISA top-up was so big that so many of us took out these accounts. At the time I got mine, I didn't think I'd be buying somewhere over the scheme's cap, so I didn't think too much about the withdrawal penalty.
"But I don't think anyone I know has managed to find somewhere to buy within the scheme's limit. We all have alerts set up for properties costing less than £450,000 but they don't often come up – my friend got a notification and it was for a parking space, it wasn't even a house. Another friend bought a narrowboat as she said that was the only way she could afford to own a home in London.
"I think the property price threshold should be increased and the penalty should be removed. If you're taking money out of a LISA to buy a property that's over the cap, I think that's really unfair when it's supposed to be a scheme to help first-time buyers. You take one step forward by using these schemes, but then you're worse off and taking two steps back because of the rules."