General Insurance Article - Royal London questions LISA penalty charge

 “This extra detail will now allow providers to consider whether they will offer a Lifetime ISA. While the requirement to collect the government bonus on a monthly basis from 2018-19 will create slightly greater administrative complexity it is clearly in the consumer interest. We also hope that the Financial Conduct Authority (FCA)’s consultation will result in consumer protection standards equal to those on pensions.

 “We agree that early withdrawals should be discouraged but question the statement that a 5% charge on top of the recovery of the government bonus represents “a small additional charge”, particularly at a time when pension exit fees are likely to be capped at a much lower level.

 “Royal London believes the decision to limit penalty-free withdrawals to first house purchase, terminal illness or after age 60, at least at the outset, is sensible. Borrowing in special circumstances is allowed in other countries and is worthy of consideration, however if it is to be permitted we would urge the government to keep the rules as simple as possible.

 “There is welcome simplification on the decision to rely on certification when setting up a Lifetime ISA and when using funds to purchase a first home and it is helpful to have confirmation of the timing and conditions of transfer to recognised conveyors in the event of a qualifying property purchase.”