Savers have been charged more than £9 million after dipping into their lifetime ISAs, a freedom of information request (FOI) has shown.

The lifetime ISA was introduced in April 2017, enabling adults under 40 to save up to £4,000 a year towards either a first home or retirement.

While an annual government bonus of up to £1,000 is available, a substantial penalty applies in certain circumstances.

Withdrawals that are not used to buy a first home or accessed before a saver's 60th birthday are subject to a 25% government charge.

The FOI request showed £4.35m in lifetime ISA penalties was collected by HMRC in 2018/19, followed by £4.69m in the first seven months of 2019/20.

No charges applied to savers who made early withdrawals in 2017/18 - the first year of the lifetime ISA.

Steve Webb, director of policy at Royal London, said:

"A lifetime ISA can be attractive for those who are clear about their plans, but these figures are a stark reminder that things can change.

"People who change their plans after saving into a lifetime ISA are finding they have less money than they started with.

"Not only do they have to pay back the Government top-up but they face a penalty charge as well.

"The lifetime ISA would be a much more attractive product if this penalty charge was abolished."

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