Withdrawal of recent funds put in AJBell LISA?

cfw1994

A friend has been told they are being made redundant in the near future 😳

They put a £2k into their AJBell LISA just before the end of the tax year (obviously before they were aware of the redundancy threat😔).

I know the LISA rules mean they cannot withdraw without penalty (clip from AJBell document explaining it).  

Would that still apply for such a recent deposit, or is it faintly worth them contacting AJBell to see about taking that sum back out to find if they can only ‘lose’ the government £500 addition?

I suspect the will be zero leeway on this, but is it worth asking?

jimjames

Once the money is in the LISA then removing will incur the penalty. That's not AJ Bell rules that's HMRC so no leeway. 

cfw1994

As I suspected…..thx

Kim_13

The time would be better spent contacting their MP, since as jimjames alludes to, it is the government that made the rules.

The treatment of LISAs has always bothered me in that there is no exception (or even a COVID style waiver so they could just keep the £2k and not the bonus) for redundancy. But the contents of a LISA will remove entitlement to benefits while money saved in a pension does not - and even when the new rules apply, you still have to be older to access a LISA without penalty than you do to access a pension. There should be a period of contribution based JSA available, though.

In the meantime, your friend should squirrel away everything they can until the redundancy happens (in a normal Cash ISA/Premium Bonds if there would be tax to pay on the interest, which may be more likely with a redundancy payment coming.) At least it is only £2k so they hopefully aren’t forced to take the penalty - others will have £30K+ in a LISA by now.

eskbanker

Kim_13 said:

The time would be better spent contacting their MP, since as jimjames alludes to, it is the government that made the rules.

While the fundamental point is valid, i.e. that the rules are set in legislation, I'd disagree that dialogue with an MP would be time well spent - this issue (of not penalising early withdrawals beyond bonus reversal) has already been discussed extensively between Martin Lewis and the chancellor prior to the last budget (alongside the £450K property value cap), and the latter declined to act on it, so, in the context of someone recently made redundant and needing financial assistance, there are many better things to do with their time and energy than wasting it on rehashing a debate that's been and gone!

https://www.moneysavingexpert.com/news/2024/03/spring-budget-lifetime-isa-martin-lewis-chancellor/

Kim_13

eskbanker said:

Kim_13 said:

The time would be better spent contacting their MP, since as jimjames alludes to, it is the government that made the rules.

While the fundamental point is valid, i.e. that the rules are set in legislation, I'd disagree that dialogue with an MP would be time well spent - this issue (of not penalising early withdrawals beyond bonus reversal) has already been discussed extensively between Martin Lewis and the chancellor prior to the last budget (alongside the £450K property value cap), and the latter declined to act on it, so, in the context of someone recently made redundant and needing financial assistance, there are many better things to do with their time and energy than wasting it on rehashing a debate that's been and gone!

https://www.moneysavingexpert.com/news/2024/03/spring-budget-lifetime-isa-martin-lewis-chancellor/

There's also an election coming, and they would want to pull some rabbits out of the hat nearer that time. Since a 4p NI cut didn't move the polls, they might be more inclined to revisit relatively easy adjustments that have been repeatedly called for. 

The argument might have been that someone who can afford to buy a property worth more than £450k is still a lot better off than a lot of people. It's a better problem to have than being made redundant. It shouldn't take an hour to write and send an email, and it might keep LISAs on the agenda.