UK savers paid £102M in penalties from Lifetime ISA withdrawals not for homes or retirement in 2024/25.

UK savers faced £102 million in withdrawal charges from Lifetime ISAs in 2024/25, up from £75.3 million the previous year, due to funds being taken for reasons other than buying a first home or retirement. The Lifetime ISA allows annual savings of up to £4,000 with a 25% government bonus, but a 25% penalty applies for unauthorized withdrawals. Despite record £103 billion in total ISA investments in 2023/24—driven by higher interest rates and cash ISA popularity—experts warn the LISA’s complex rules may discourage long-term savings and call for reforms, including lowering the withdrawal charge and simplifying the system.