Around 45,000 Lifetime ISA savers incurred more than one withdrawal penalty during the 2024-25 tax year, with average cumulative charges of £760, according to figures obtained by savings app Plum.

The data, released by HMRC following a Freedom of Information request, shows that almost 4,000 savers faced combined penalties exceeding £2,000, while the 25 individuals with the largest cumulative charges each lost more than £11,000 on average.

Those penalised repeatedly accounted for approximately a third of the 129,200 Lifetime ISA (LISA) holders who incurred withdrawal charges during the tax year.

The findings come as the government prepares to replace the Lifetime ISA with a new First-Time Buyer ISA, with details of the proposed scheme, including savings limits and property price restrictions, yet to be confirmed.

The figures also provide information that MPs on the Treasury Committee had previously requested during their inquiry into the Lifetime ISA. HMRC told the committee that it could not produce the statistics within the requested timeframe, an omission highlighted in the committee’s report published in June 2025.

THOUSANDS FACE SUBSTANTIAL CHARGES

Plum’s analysis found that 33,530 savers who incurred multiple penalties lost less than £1,000 in total, while 7,470 faced combined charges of between £1,000 and £1,999.

A further 2,350 people incurred penalties of between £2,000 and £2,999, with 820 losing between £3,000 and £3,999. At the upper end, 60 savers faced cumulative charges of £8,000 or more.

Under the existing Lifetime ISA rules, savers can contribute up to £4,000 annually and receive a 25% government bonus, worth a maximum of £1,000 each year, until the age of 50.

However, withdrawals made before the age of 60 for purposes other than an eligible first-home purchase generally attract a 25% charge on the amount withdrawn.

Because the charge applies to the entire withdrawal, including the government bonus, savers can lose some of their original contributions. Someone depositing £1,000 would receive a £250 bonus, but withdrawing the resulting £1,250 would trigger a £312.50 charge, leaving £937.50.

Rajan Lakhani, personal finance specialist at Plum, said: “It is noteworthy that this exact data was requested by a parliamentary committee, but MPs were told it could not be produced in time.

“And yet a Freedom of Information request has surfaced it in a few short weeks.”

He added: “More than 45,000 people have been stung with multiple penalties in the space of a single year when they’ve been doing the right thing and using a LISA to help their homeownership dreams become a reality. This includes more than 11,000 savers who lost more than £1,000.

“These are significant sums of money for first-time buyers who already face considerable obstacles to getting a foot on the housing ladder.”

CALLS TO RAISE PROPERTY PRICE CAP

Plum is urging the government to reconsider the savings and property price limits when designing the replacement scheme, particularly the existing £450,000 maximum purchase price for homes bought using a Lifetime ISA.

The cap has remained unchanged for nine years, despite house price growth over that period, creating particular difficulties for prospective buyers in London and the south-east.

Plum wants the threshold increased to approximately £600,000 to reflect property price inflation.

The proposed First-Time Buyer ISA is expected to remove the retirement savings element of the existing product and pay the government bonus when a property is purchased, rather than adding it to the savings balance beforehand.

This would eliminate the current withdrawal penalty mechanism, although savers would no longer earn interest or investment returns on the government bonus before purchasing a property.

The annual contribution allowance and maximum eligible property value under the replacement scheme have not yet been announced.

Lakhani said: “First-time buyers in London and the South East face the most acute affordability challenges in the country. The effect of the existing Lifetime ISA – frozen at £450,000 for nine years now – has been to shut many out of the housing market altogether.

“The launch of the First-Time Buyer ISA presents the government with a perfect opportunity to show it’s serious about democratising access to the housing ladder by raising the existing cap to around £600,000 in line with price growth.”

Plum has also questioned whether reforming the existing Lifetime ISA would be preferable to introducing a replacement savings product.