Lifetime ISAs
Lifetime ISAs - or LISAs - were introduced by Government in 2017 as a way to help those under 40 save to buy their first home or to save for later life.
Types of complaint we see
Most of the complaints we get from consumers about Lifetime ISAs relate to:
Administration:
- delays in opening Lifetime ISAs
- transferring money in and out of a Lifetime ISA into other ISAs
Misunderstandings of the rules:
- withdrawal criteria
- length of time a Lifetime ISA needs to be open before taking money out
Handling a complaint like this
When you receive a complaint involving Lifetime ISAs, you should reply to your customer within eight weeks.
If you don’t reply within the time limits, or the customer disagrees with your response, they can bring their complaint to us. We’ll check it’s something we can deal with, and if it is, we’ll investigate.
We’ll expect you to be able to show us that you’ve investigated the complaint thoroughly and that you have reflected carefully on the circumstances.
Find out more about how to resolve a complaint.
What we look at
As with every case, in reaching a decision about what’s fair and reasonable, we consider:
- the relevant law and regulations
- any regulator’s rules and guidance that applied at the time
- any industry codes of conduct in force at the time
- what we consider was good industry practice at the time
If there are disagreements about the facts, we’ll make our decision about what probably happened using evidence provided by you, your customer and relevant third parties.
Different types of ISAs will have specific variables that we'll look at when making a decision. In the case of Lifetime ISAs, depending on the nature of the complaint, we will look at how well the rules for Lifetime ISAs were explained to the consumer and whether a Lifetime ISA was the right product for the situation. This will include how clearly explained how the product works, particularly the rules around transfers and withdrawals.
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The government bonus added is 25% of whatever is put into the account, up to £1,000 per year. This stops when the account holder turns 50.
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Consumers are allowed to take money out of their Lifetime ISA if they're:
- buying their first home - they must live in the property, so buy to let is not allowed with a Lifetime ISA
- aged 60 or over
- terminally ill, and only have 12 months or less to live
If they take out money for any other reason, they'll have to pay a 25% fee for the amount they want to withdraw.
This fee recovers the government bonus and applies an extra charge to the original savings.
Withdrawal fee example
A consumer pays £800 into their Lifetime ISA over a year, accruing a government bonus of 25%, which would be £200, giving a total of £1,000. They want to withdraw the full £1,000 from the Lifetime ISA, but incur a withdrawal fee (25%) of £250, meaning that they would only receive £750.
The withdrawal fee will still apply even if the first bonus hasn't been received.
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If a consumer is planning on buying their first home, they can use a Lifetime ISA to save for it. But there are some conditions for this, and all of these must apply to the purchase:
- the property has to cost £450,000 or less
- they must buy the property after the Lifetime ISA has been open for 12 months at least
- they must use a conveyancer or solicitor to act on their behalf in the purchase - the Lifetime ISA provider will pay the funds directly to them
- they have to buy with a mortgage
- they can't already own a property or have a legal interest in a property (such as being a beneficiary of a trust that includes property)
If they're buying with someone else who also has a Lifetime ISA, they can use theirs too - as long as they both meet all the conditions.
Consumers can have a Help to Buy ISA and Lifetime ISA at the same time, but they can only use the government bonus from one when buying their first home.
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Consumers can transfer their money in and out of a Lifetime ISA to other types of ISAs before the age of 60, but they will have to pay a 25% withdrawal fee.
Putting things right
If we decide you’ve treated the customer unfairly, or have made a mistake, we’ll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn’t happened.
We may also ask you to compensate them for any distress or inconvenience they’ve experienced as a result of the problem.
The exact details of how we’ll ask you to put things right will depend on the nature of the complaint, and how the customer lost out.
Case studies
Alexis loses her bonus when she cashes in her Lifetime ISA
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Sean faces a withdrawal charge for transferring between ISAs
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Shelby says her bank’s Lifetime ISA instructions are unclear
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Zosia misses Lifetime ISA bonuses because of delay in opening account
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Business Support Hub
If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub. Our Business Support Hub can give general information on how the ombudsman might look at a particular complaint. We also offer guidance on our rules and how we work.
Find out how to contact the Business Support Hub.
Information for consumers
If you're a consumer looking for information, you can read more about how we can help with complaints about Lifetime ISAs.
And if you want to make a complaint, use our complaint checker to see if your issue is something we can help with.