Thousands of UK bank account holders wake up to £684 'deduction' from total

People with an ISA have been warned after more than 185,000 savers were charged for taking out their own money. Thousands of ISA holders have been slapped with fines totalling £127million after taking money out of their own savings accounts.

New figures have revealed that the average fine for a Lifetime ISA (LISA) holder was around £684 - including lost interest. The figures have emerged after analysis from the mortgage lender MPowered Mortgages this week.

You can take your savings out of a Lifetime ISA when you're 60 or over. You'll pay a 25 per cent charge if you withdraw money or transfer the Lifetime ISA to another type of ISA before 60. If you die your Lifetime ISA ends on the date of your death.

READ MORE UK tourists in Germany face £84 fine 'as soon as they drive into four cities'

There's no charge to withdraw the funds or assets from your account. Stuart Cheetham, CEO of MPowered Mortgages, said: "Lifetime Isas were created to help first-time buyers save up to buy a home, but thousands of savers are being unfairly penalised each year for doing just this.

"The Lisa withdrawal penalties are designed to ensure savers only use these accounts for what they are designed for - buying a first home or saving for retirement - but the cap on the value of property they can be used for means Lisas are increasingly unfit for purpose."

You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA. You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40, the government rules stipulate.

The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.