The Financial Conduct Authority (FCA) has suggested that Lifetime ISA providers should warn savers of the potential risks associated with the new savings vehicle.
Announced in this year’s Budget, the Lifetime ISA will be available to savers from April 2017, and is designed to permit individuals under the age of 40 to save for a first home or to save towards their retirement.
Savers who open a Lifetime ISA will be able to pay in up to £4,000 per tax year, receiving a 25% bonus from the government for every pound they put in. Individuals who save the maximum will receive a £1,000 bonus each year.
Under the FCA’s proposed rules, providers will be required to supply specific warnings to consumers at the point of sale, reminding them of the importance of having an appropriate mix of assets within their Lifetime ISA.
Alongside this, firms will need to remind savers of the early withdrawal charge and any other charges.
The financial regulator stated that it intends to ‘regulate the Lifetime ISA in the same way as other ISA products’, but will also create new protections designed to ‘reflect the dual purpose of a Lifetime ISA and the restrictions on accessing funds’.
The FCA will carry out a consultation on its proposals in an effort to implement the new rules before April 2017.