By Christian Abbott

Copyright birminghammail

Lifetime ISAs, or LISAs, are an effective way for savers to build up the cash for their first home or retirement. It allows them to save a maximum of £4,000 annually, with a 25% boost from the government on any savings deposited, meaning the maximum amount each year is £5,000. However, it also comes with a 25% withdrawal charge if savers take their money out for any other reason than to buy a first home or retirement. Read more: British Gas announces ‘£168 cheaper’ energy tariff than October price cap Data from HM Revenue and Customs (HMRC) has revealed that in 2024/25, LISA savers were hit with approximately £102 million in withdrawal charges. This is a significant increase on the previous year, which totalled £75.3 million. The issue of the hefty withdrawal cost has been criticised by finance expert Martin Lewis, who called LISAs a “brilliant, brittle and broken product.” Speaking on BBC 5 Live this week, he said: “In my view, Lifetime ISAs are a brilliant, brittle, and broken product. “Let’s start with the basics: a Lifetime ISA is a product you can open aged 18 to 39. When you save in it – you can put up to £4,000 a year in it – if you use it to buy a qualifying first-time property, you get a bonus of 25%. That’s £1,000 a year free money, or state-funded money, that you get towards your first-time deposit. If it works for you, it’s unbeatable and brilliant.” He added: “You don’t get back all your money, never mind not getting the bonus. Now, I think that is a perverse incentive. “It puts people off from saving in the first place, even people it won’t affect, because they are scared of that withdrawal penalty. “It could be really lucrative – I’ve had so many people who’ve had £1,000s on the Lifetime ISA. You know, two of them have saved together for three or four years, and have got £3,000 or £4,000 each towards their first-time deposit – great. “I’ve also had loads of complaints from people who’ve been absolutely stuffed by it, and it seems to me if we’re going to have a product like that, we should make sure it’s working.” Government minister Emma Reynolds MP noted: “As of 2023/24, there were over 1.3 million LISA accounts open and, since its introduction in 2017, the LISA has helped 227,600 people purchase their first property. “To ensure the product is well targeted, the property price cap (£450,000) supports most first-time buyers across the UK, including those households who may find it difficult to get onto the property ladder. “In addition, the withdrawal charge ensures that the LISA has been used for its intended purposes: homeownership for first time buyers or later life savings.”