https://www.fca.org.uk/publication/consultation/cp16-32.pdf
Tom Selby, senior analyst at AJ Bell, comments:
“Communication must be front and centre in the rollout of the Lifetime ISA, a fact the FCA has rightly acknowledged. The 25% exit penalty for early withdrawal is the major drawback of the product, so savers need to be fully aware of its existence and the potentially severe impact it could have on the value of their pot.
“It is important that people considering opting out of a workplace pension in favour of a Lifetime ISA are aware of what they could be missing out on – a contribution matched by your employer is effectively a guaranteed bonus of 100%. Investors will also need to think carefully about their investment strategy depending on whether their objective is buying a house or saving for retirement.
“The initial proposals looks sensible but careful consideration will be needed to ensure comparisons with pensions are as easy as possible and that the impact of the exit charge on returns can be understood.”