Young savers throw away £34m in Isa bonuses

Young savers have returned £34m in Isa bonuses which were supposed to help fund the cost of buying their first home.

Would-be first-time buyers handed back record sums from their Lifetime Isas in the last tax year, money that had been earmarked for a deposit.

The sum returned to the Government tripled last year as it clawed back the bonuses it had previously given to “Lisa” savers. Account holders had no choice but to give up millions in Government top ups as they raided their savings during the height of the pandemic. 

The Lisa comes with a yearly 25pc Government bonus, making it one of the most cost-efficient ways for first-time buyers to save. But those who take their money out for anything other than to buy a house or before they turn 60, either for emergencies or because their plans changed, must pay an effective penalty of 6.25pc.

These inflexible rules on saving money have prevented young savers from getting their money back since Lisas were established in 2017. 

However, the Government effectively dropped exit penalties in 2020 to help those who desperately needed to access their money. This ensured that savers were only forced to return the Government bonus, rather than handing over any of their own cash, as is normally the case.

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