Lifetime ISA with Moneybox

dianeob1988

I opened up a LISA with Moneybox in January 2021 in the hope of boosting my savings for my first flat deposit. I've recently had an offer accepted and intended on using my LISA towards my deposit but I've been informed that I will have to take a 25% penalty for withdrawing my LISA before one year of opening the account. While I can understand that my bonus will be taken from me, I am devastated that will also be taking £500 from my savings as well. Moneybox never made it clear when I signed up with them that if I used my LISA within a year of opening the account, that I would be penalised. The worst part is I need to withdraw the money to use it for its intended purpose - to help towards a flat deposit. I've made a formal complaint to Moneybox as it was never clearly stated when I signed up but I'm just wondering if there is anything else I can do? £500 as a single first time buyer is a lot of money.

grumiofoundation

Are you able to complete without using the money from lifetime ISA? In this event you should look at switching to a stocks and shares lifetime ISA and using it for retirement. 
Or at least some of it?
For example if you withdrew £4000 you would get £3000 back after penalty but would still have £6000 in the account so you wouldn't have lost overall. 

Moneybox aren't the ones who are taking the penalty, is a prerequisite of the LISA rules.
https://www.gov.uk/lifetime-isa

If moneybox genuinely didn't make you aware of the penalty maybe you would have a chance but it is clearly stated on their website and their Ts and Cs so I would be very surprised if they uphold your complaint.

https://www.moneyboxapp.com/faqs/lisa/how-can-i-use-my-lifetime-isa-to-buy-house/
https://www.moneyboxapp.com/terms-and-conditions/

eskbanker

It's not even necessary to go as far as the Ts & Cs (although obviously people should) - they also prominently clarify on the product front page, at https://www.moneyboxapp.com/cash-lifetime-isa

What else should I know?

• [...]
• You can use the Lifetime ISA to buy a house up to the value of £450,000 anywhere in the UK but must have had the account open for at least one year before you withdraw money to do this.
• [...]

C_N_

eskbanker said:

It's not even necessary to go as far as the Ts & Cs (although obviously people should) - they also prominently clarify on the product front page, at https://www.moneyboxapp.com/cash-lifetime-isa

What else should I know?

• [...]
• You can use the Lifetime ISA to buy a house up to the value of £450,000 anywhere in the UK but must have had the account open for at least one year before you withdraw money to do this.
• [...]

The very next bullet point after that:

• If you need to withdraw money for any reason other than your first home (up to £450,000) or retirement, you'll pay a government charge of 25% on the amount you withdraw. This means you'll get back less than you've put in.

Not sure how they could make it any clearer.

In my experience Moneybox customer service are good so you may get the difference back as a goodwill gesture but at this point I can't see what they have done wrong.

The government charge was reduced during Covid so that only the 25% bonus was taken if you withdraw early, but this reverted back at the start of this tax year. 

eskbanker

C_N_ said:

eskbanker said:

It's not even necessary to go as far as the Ts & Cs (although obviously people should) - they also prominently clarify on the product front page, at https://www.moneyboxapp.com/cash-lifetime-isa

What else should I know?

• [...]
• You can use the Lifetime ISA to buy a house up to the value of £450,000 anywhere in the UK but must have had the account open for at least one year before you withdraw money to do this.
• [...]

The very next bullet point after that:

• If you need to withdraw money for any reason other than your first home (up to £450,000) or retirement, you'll pay a government charge of 25% on the amount you withdraw. This means you'll get back less than you've put in.

Not sure how they could make it any clearer.

That bullet point doesn't clearly apply to OP's situation though, because the withdrawal is for a first home - it's specifically the one-year rule that's the issue here....

Alexland

There's probably not much point complaining to Moneybox as it's in their terms and these rules are set by government policy. The best thing would be to try and buy the property without withdrawing the Lifetime ISA money and then move the account to a S&S provider to invest until it can be withdrawn without penalty from age 60.

Alternatively if you do a partial withdrawal you may be able to balance the reduced penalty with the overall bonus earned then invest the rest of the money until age 60.

md258

Depending on the whole chain, you may be able to slow down (or it may happen that way) the property purchase until Jan 2022- at which point you will not be penalised.

My purchase took 6 months from offer to completion as it took 3 months for the chain to complete