Former pensions minister Steve Webb has said “fat penalties” of 5 per cent on the Lifetime ISA compare uncomfortably to exit charges on workplace pensions, and branded it little more than a fine on savers (LISA).

The director of policy at Royal London said exit penalties on the Lifetime ISA are at odds with government pressure on product providers to cap or scrap exit charges, which many have done following pressure from independent governance committees.

Mr Webb Said “It sits uncomfortably alongside other statements made by the government.” Announced at this year’s Budget, the Lisa has faced criticism for coming with a hefty exit penalty, and over fears that it could derail pension saving.

The Lisa offers a 25 per cent government bonus to help people under the age of 40 save for retirement or to buy their first home. But for those who withdraw funds from the Isa before the age of 60, it comes with a 5 per cent exit fee and a loss of bonus unless they buy a house.

Mr Webb said: “It seems weird as the FCA (Financial Conduct Authority) it consulting on exit fees. It has been told by the government that it has to set a cap on exit fees because they stop people accessing their own money, and accessing pension freedoms for the government created product, to then have a fat exit penalty.”

Since last February, the FCA put ensuring value for money in legacy pensions under the responsibility of independent governance committees. Many providers have come under the spotlight recently as some independent governance committees released inaugural reviews heavily criticising expensive exit fees.

(FTadviser, April, 2016)

LISA Advice Bristol

If you would like to speak with one of our Independent Financial Advisors and potentially receive financial advice, please contact us on 0117 923 7652. We are based in CliftonBristol but we are happy to service clients from across the UK and we provide free initial meetings at our client’s convenience.

Churchill Wealth Management Limited is located at 13 Alma Vale Rd, Bristol BS8 2HL, United Kingdom.

About Us: Churchill Wealth Management is a team of independent financial advisors/financial advisers (IFAs) based in Clifton, Bristol. We provide independent financial advice, including pension advice, investment advice, inheritance tax planning and protection/insurance advice.