LISA savers hit with multiple withdrawal penalties in 2024/25

Around 45,000 lifetime ISA (LISA) savers were penalised with unauthorised withdrawal charges more than once in 2024/25, Plum has revealed.

Freedom of information data obtained by the smart money app found that the average cumulative losses stood at £760, which MPs sitting on the Treasury Committee were told HMRC couldn’t produce within their requested timeframe.

Plum said the omission was highlighted in the Committee’s report published in June last year, and the government now plans to replace to LISA with a new first-time buyer ISA. While the new wrapper will aim to strip back complexity and penalties, full details of how this will work in practice are yet to be revealed, though they may emerge in a future Budget.

Some commentators have argued that LISA rules are flawed and outdated. Currently, those who withdraw cash lose 25% of the withdrawal amount and can end up with less than what they put in despite the government bonus.

Furthermore, the maximum value of a property bought using a LISA is £450,000, a cap which disadvantages buyers in London and the South East, where historically property prices have accelerated ahead of the rest of the country.

Figures released to Plum revealed the average saver penalised more than once in 2024/25 lost £760 cumulatively that year, while around 3,970 savers incurred combined fines in excess of £2,000.

In the most severe cases, the top 25 persons incurring multiple fines, average combined penalties per person were in excess of £11,000.

The 45,000 who suffered multiple penalties represented around a third of the 129,200 people penalised in that tax year.

Personal finance expert at Plum, Rajan Lakhani, stated: "It is noteworthy that this exact data was requested by a parliamentary committee, but MPs were told it could not be produced in time.

“And yet a freedom of information request has surfaced it in a few short weeks. What the data shows will anger many and focus minds on ensuring the new first-time buyer ISA is fit for purpose.

"More than 45,000 people have been stung with multiple penalties in the space of a single year when they’ve been doing the right thing and using a LISA to help their homeownership dreams become a reality. This includes more than 11,000 savers who lost more than £1,000."



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