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Michael Browne

Warning over exit fees on lifetime ISAs

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Savers who put cash into the new Lifetime ISAs are being warned they could lose almost half of what they earn in exit fees.


The Lifetime ISA is set to launch in April next year and lets savers put away up to £4,000 a year between the ages of 18 and 50. People will then get a 25% bonus on their savings from the government when they retire.


But experts warn that if savers dip into their cash pile before they reach 60, for any other reason than buying a first property or because of critical illness, the government bonus is clawed back and a 5% penalty will be applied.


Research from AJ Bell, which sells investment funds, has found these charges would have a massive effect on savings.


If someone saved the maximum allowable over 10 years, they would build up the ISA to £62,432 with 4% annual growth.


But the exit charge would reduce this by £15,608, or 45% of all the growth over the previous decade.





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