The exit charge paid when taking money out of a Lifetime ISA early has been temporarily cut from 25% to 20%, so as to help people who might need to access their savings during the pandemic.

The lower exit charge has been backdated to 6 March, with anyone affected by the 25% charge from that date able to claw back the difference, and runs until April 2021.

Available to under-40s, an individual can put up to £4,000 a year into a Lifetime ISA, with the Government adding a 25% bonus to their savings up to a maximum of £1,000 a year until they reach 50.

The money cannot be accessed without a penalty before the age of 60 unless it is used to buy a first home or the saver is critically ill.

The higher 25% penalty meant someone would be left with less money than they started with. For example, someone who had invested £4,000 and benefited from the £1,000 top up would have been left with just £3,750 if accessing all their funds early. Cutting the penalty to 20% means they are just giving up the Government bonus money.

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