Nucleus has called for advice charging to count as a free withdrawal from the Lifetime ISA (LISA) as one of nine recommendations to HM Revenue & Customs (HMRC) to improve the new savings scheme due to come into effect in April.
HMRC's consultation on the proposed savings scheme closes today and Nucleus product technical manager Rachel Vahey (pictured) has argued a charge-free advice withdrawal from the LISA would help people access advice.
"With the introduction date for LISA fast approaching, much of the detail remains unclear," she said. "For some, the LISA will provide them with an effective way of saving for their goals - whether that's their first house or their later life. But it won't be suitable for all.
"Getting regulated advice could help many make key decisions about whether to save within a LISA. To help people access advice, we would like advice charging to be a charge-free withdrawal, instead of having to pay a 25% charge [as the rules currently propose]. This could mean investors receiving the help they need and paying for it the same way they do for other ISAs and pensions."
Under HMRC's current proposals, the LISA will offer a 25% government bonus on contributions of up to £4,000 a year up until the age of 50. LISA savers will be able to use their savings and government bonus to buy a house of up to £450,000 or choose to withdraw some, or all, of the savings tax-free over the age of 60 for any purpose.
Those who withdraw their funds outside of the aforementioned 'life events' will incur a 25% withdrawal charge on their LISA savings, plus an extra 5% withdrawal penalty charge. However, the government has since announced the 5% penalty charge will be dropped for the scheme's first year. Some 800,000 people are expected to use the scheme by 2021.
Nucleus's nine LISA recommendations
1. All self-employed people can open a LISA account, up to age 50 [Currently, only people under the age of 40 will be able to open a LISA].
2. All communications should make it clear the LISA is neither a direct substitute for a pension nor has the full flexibility of an ISA.
3. Simplify the ISA regime.
4. Merge the Help to Buy ISA and LISA.
5. For the Government to carry out a comprehensive study of what action people will take on the introduction of LISA and to regularly monitor and report on the effects after launch - including details of revenue raised from withdrawal charges.
6. Allow adviser charging as a charge-free withdrawal.
7. Set the withdrawal charge at 20% [It is currently slated to be 25%].
8. All communications should be clear the withdrawal charge will reclaim government bonus (plus interest) as well as a charge on member contributions.
9. Raise the LISA annual payment limit and review it each year based on house price increases [The current proposed payment limit is £4,000 per year].
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