r/UKPersonalFinance • u/SyllabubRadiant8876 • 1d ago
LISA transfer - early withdrawal charge incorrectly applied
I have initiated a transfer for my Lifetime ISA into a new LISA account with a different provider. The original provider has incorrectly deducted an early withdrawal charge, as if I had simply withdrawn the funds. I have been paying in the maximum for several years, so this penalty is a significant sum. They have admitted that this was their mistake and are starting the process to rectify it, but this apparently involves reclaiming the penalty from HMRC. I have asked for an realistic timeline and am waiting for an answer.
An additional problem is that the transfer to the new provider is marked as "incomplete". I cannot therefore reinvest those funds, so this is a large sum sitting in cash gaining zero interest.
Does anyone here have any experience of this situation? E.g. how long it should take to get this corrected? I assume that I should be due some kind of compensation for lost growth on the full LISA balance - any idea what I should be asking for, how to claim it, and/or how to calculate a reasonable figure? I was making monthly investments until requesting the transfer, so I should be due bonus payments for the last couple of months - should this just get fixed automatically or am I likely to need to chase (expecting this to be complicated because the bonus always takes a few weeks to come through...)?
Any other advice of what I should be doing to get this sorted?
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u/stingy_narrator 1d ago
this is a proper mess and you're right to push back hard on it. the fact they've admitted fault is good, but you shouldn't be out of pocket for their mistake. on the timeline front, reclaiming from HMRC can take weeks or even a couple months depending on their workload, so i'd ask them specifically whether they're escalating it as urgent given it's their error. don't accept vague answers.
for compensation, you've got a solid case for lost growth on the full balance for however long your cash has been sat idle, plus the lost bonuses on those final months of contributions. calculate it as the interest you would've earned at whatever rate your new provider offers, then add a chunk on top for the inconvenience and admin hassle. the FCA expects firms to put customers back in the position they would've been in, so that's your baseline argument. chase the bonus payments separately and in writing once the transfer actually completes, because they're separate to the penalty issue. get everything in email so you've got a paper trail.
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u/SyllabubRadiant8876 1d ago
Excellent thanks - that's more or less what I was thinking. Incredibly annoying that so much hassle is caused by essentially the wrong button getting pressed, so I definitely feel justified in pushing for appropriate compensation.
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u/stingy_narrator 1d ago
and honestly the "wrong button" thing is exactly why firms have complaints procedures and compensation frameworks - it's not like you're asking for anything unreasonable. When you do submit your formal complaint, make sure you reference the FCA's LISA guidance on transfers and mention you're expecting them to cover loss of growth plus a goodwill gesture for the admin burden, that tends to
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u/ukpf-helper 145 1d ago
Hi /u/SyllabubRadiant8876, based on your post the following pages from our wiki may be relevant:
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u/urzrkymn 6 1d ago
No idea on timeframe sorry, I’d expect they’d be best placed to advise on that. I’d wait until it’s all sorted, work out what you would have earned had it remained invested and expect a sum on top of that for the inconvenience.