In our weekly series, readers can email any questions about their finances to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot and has worked in financial services for 25 years. If you have a question for her, email us at money@inews.co.uk.
Question: My parents have been contributing to a Skipton Lifetime ISA on my behalf for nearly nine years, paying in the maximum £4,000 each year and receiving the £1,000 government bonus. The account now stands at around £44,000. I’m 28 and planning to buy a property with my girlfriend next year. The challenge is that the kind of properties we’re considering – three-bedroom homes in commuter towns neighbouring London – are well above the £450,000 limit. This means I wouldn’t be able to use my Lifetime ISA towards a purchase without incurring the 25 per cent withdrawal penalty, which would equate to £11,000. Should I wait and hope the rules change? Accept the penalty and use the funds towards a deposit? Leave it there until retirement?
Answer: You’re in a frustrating but increasingly common position. You’ve done exactly what the Lifetime ISA was designed to encourage which is steady, disciplined saving, topped up by the government. Yet as you get closer to buying, you find the rules no longer reflect the reality of the market you are trying to enter.
