Savers who have paid the controversial Lifetime ISA withdrawal penalty are still £136.1 million ahead of their own contributions as a group, new analysis suggests.
The findings from Moneybox challenge the assumption that paying the 25% government withdrawal charge necessarily leaves Lifetime ISA savers worse off.
Analysis of more than one million Moneybox LISA customers found that those who had incurred an unauthorised withdrawal penalty were still in a positive position overall when their withdrawals and remaining savings were compared with the money they had personally put in.
Among customers who paid the withdrawal charge but have not yet bought a home, the group was £53.8 million ahead of its own contributions.
For customers who paid the charge and later went on to buy a home, the figure was even higher, at £82.3 million ahead.
Combined, that puts these two groups £136.1 million above their own contributions.
Moneybox says the analysis takes into account the money customers withdrew after charges, the value remaining in their LISA and the amount they personally contributed.
This means the calculation also captures the impact of the Government's 25% bonus, along with interest and investment growth.
However, Moneybox stresses that the figures do not mean every individual who pays the withdrawal charge will come out ahead.
The company said the penalty can leave individual savers out of pocket, but its analysis shows that the customer groups examined remained in a positive position overall.
How much are LISA customers ahead?
Moneybox's analysis found:
- £53.8m ahead – customers who incurred an unauthorised withdrawal penalty but have not yet bought a home
- £82.3m ahead – customers who incurred the penalty and later bought a home
- £1.71bn ahead – customers who did not incur an unauthorised withdrawal penalty and have not yet bought a home
- £680m ahead – customers who did not incur the penalty and bought a home
Brian Byrnes, Director of Personal Finance at Moneybox, said: “The Lifetime ISA is doing what it was designed to do: helping people build a meaningful deposit and move closer to buying their first home.
"Our data shows that even when customers need to make an early withdrawal, the combination of their own saving, the Government bonus and growth on their money means they remain ahead as a group.
“That does not mean the withdrawal charge cannot be improved. People’s circumstances change, and the LISA should give them more flexibility when they do. But this analysis shows the strength of the product — it continues to create value for people saving towards a home, rather than simply taking it away.”
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What happens to the LISA withdrawal charge?
The findings come as the Treasury considers a proposed First Time Buyer ISA to replace the Lifetime ISA.
Moneybox is campaigning for changes to the existing LISA, rather than its replacement.
It wants the £450,000 property price cap increased and the withdrawal penalty reduced from 25% to 20%.
The company also argues that the proposed First Time Buyer ISA could leave some future buyers with less investment growth because the Government bonus would be withheld until completion, rather than being paid monthly as under the LISA.
Moneybox estimates that someone paying the full allowance over 10 years could miss out on more than £3,600 in compound growth under the proposed structure.
It also warns that Stocks & Shares ISA customers could be unable to move their savings into cash as they approach a house purchase, potentially leaving deposits exposed to market movements.
Brian Byrnes continued: “Under the proposed First Time Buyer ISA, savers would lose the ability to earn interest or investment growth on their government bonus. Those investing in Stocks & Shares would also be unable to move their money into cash as they get closer to buying a home, creating unnecessary risk at precisely the point they need certainty.
“The best outcome for the millions of current and future LISA savers is to improve the product people already understand and use by raising the house-price cap, reducing the withdrawal penalty from 25% to 20%, and retaining the benefits that help first-time buyers build a deposit. We do not need another ISA adding complexity and taking away value.”
Moneybox's analysis covered more than one million customers who had ever funded a Cash or Stocks & Shares LISA as of September 9, 2026.
Its "net position" was calculated using cash withdrawn after charges, plus the remaining LISA balance, minus the customer's own contributions. Government bonuses, interest and investment growth were included in the calculation.
The figures therefore show the combined position of customer groups, rather than guaranteeing what an individual LISA saver will have gained or lost.
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How to open a Lifetime ISA with £1
If you're considering a Lifetime ISA, you can get started with as little as £1, depending on the provider.
There are some important rules to check before opening one.
- You must be aged 18 to 39 to open a Lifetime ISA.
- You can pay in up to £4,000 each tax year.
- The Government adds a 25% bonus on contributions, worth up to £1,000 a year if you pay in the full £4,000.
- You need to make your first payment before your 40th birthday.
- You can use the money towards a first home or withdraw it from age 60 onwards without the withdrawal charge, subject to the LISA rules.
- For a first-home purchase, the LISA generally needs to have been open for at least 12 months before the withdrawal.
You can open a LISA online with a provider offering the account. Some providers allow you to start with a small initial deposit.
The 25% Government bonus means even a relatively small contribution can receive a boost. For example, a £1 contribution would attract a 25p bonus, while paying in £4,000 over a tax year could result in a £1,000 Government bonus.
However, the money is designed for specific purposes. If you withdraw it for another reason before age 60, a 25% withdrawal charge normally applies.
That charge is why it is important to understand the rules before putting money into a LISA, particularly if you think you may need access to the cash before buying your first home or reaching 60.
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