Unexpected withdrawal charge from transferring money to different ISA types

What happened 

Sean already had a Help to Buy ISA, which he’d had for a while. He opened a new Lifetime ISA and transferred a large amount from his existing Help to Buy ISA. A little while after this, he contacted the business and told them that he wanted to withdraw all the money so he could buy his first home. The business explained to him that he would incur a withdrawal charge because the Lifetime ISA hadn’t been open for the required 12 months.

Sean was unhappy with this because he thought that there would be continuity between the ISAs, so the time he’d already had the Help to Buy ISA for would extend to the Lifetime ISA as well. He got in touch with us and complained, so we took a look to come to fair decision about what happened.

What we said

We looked at what the business had said to Sean when he opened up the Lifetime ISA. The policy’s terms explained that a customer could transfer an existing Help to Buy ISA into a Lifetime ISA. It also explained that the customer would receive the government bonus on the full amount that was transferred. And it went on to explain that the transfer would effectively backdate the Lifetime ISA, restarting the 12 month eligibility for withdrawing the money. 

In the terms it said: “The account opening date is the date that we receive your first payment. This is the date your 12 month period starts if you want to make a withdrawal for a first house purchase.”

We didn’t think it would be fair to say that the business wasn’t clear about the account’s opening date and 12 month eligibility for withdrawal money without a charge as it was explained in the account’s terms. We also didn’t think it would be fair to say that the business was wrong in charging the withdrawal fee because Sean had taken out the money before the 12 month criterion was met.

After looking at all the available evidence from both sides, we decided not to uphold Sean’s complaint.