Martin Lewis warns people face £600 bill for withdrawing their own money

The BBC Sounds podcast host has discussed Lifetime ISAs on his latest episode of the show, which dropped on Sounds this Wednesday.

Martin Lewis has warned people they face being "penalised" £600 for withdrawing their OWN money. The BBC Sounds podcast host has discussed Lifetime ISAs on his latest episode of the show, which dropped on Sounds this Wednesday.

A Lifetime ISA (LISA) can be opened by anyone aged between 18 and 39. You can use it to save up to £4,000 a year, towards either a first home costing up to £450,000 or for retirement, and the state adds a bonus of up to £1,000 a year on top.

Martin said: "You can take the money out only for one of two reasons: number one, you are buying a first time property, you've never bought a property before, you've never owned a property before and that property has to be worth under £450,000. The second reason is you've hit age 60 and then you can take the money out and you get to keep the bonus.

READ MORE Met Office speaks out over UK being hit by 'notable' snow next week

"No one who has opened the ISA has hit age 60 yet because they haven't been around long enough. "It's a savings account. It's just a tax-free savings account, but the real key to it is the 25% state bonus. The problem with a lifetime ISA...the big one is if you take your money out for any other reason than to buy a first time qualifying property or at retirement effectively when you're age 60, you take a 25% penalty."

Martin then warned if you saved £10,000 you get a bonus totalling to £12,500 but when you remove it you pay the 25% penalty. This means your final total is £9,375 - £635 less than what you put in yourself. He noted: "Now I don't have that much of a problem with that because that's to ensure that people are only using the LISA for the reasons intended.

"This is my problem, the LISA was launched in 2016. The property threshold limit in 2016 was £450,000 the property limit is still £450,000. Many people, particularly in London, the southeast and other urban metropolitan areas, have been priced out due to rising house prices. They've saved as the government advised for their first property, but now their property is valued over £450,000. To withdraw the money, even to purchase a first-time property which is the purpose of this product, they face a significant penalty."