Savers who take up the new Lifetime ISA should escape a penalty for withdrawing their money early if they have been made redundant or face dealing with critical illness.

That was the conclusion of members of the public and professionals who were asked their views by the Tax Incentivised Savings Association (TISA).

Adrian Boulding, TISA policy strategy director, said: “The survey clearly shows that both professionals and the general public agree that critical illness and redundancy should be included in the additional lifetime events.”

George Osborne revealed the Lifetime ISA in March but details emerged afterwards of a catch.

If savers choose to take out their money from the Lifetime ISA early, they will lose the Government bonus and have a 5% charge applied.

Unless they are buying their first house, investors will already lose the Government bonus and any interest or investment growth on that bonus if they cash in their investment early.

Currently, the savings and bonus can be withdrawn based on three criteria:

• House purchase for first-time buyers
• Terminal illness
• Retirement at 60 years old

The Chancellor has said that the Government will be looking to add further lifetime events to the list. This prompted TISA’s survey, which was completed by over 220 professionals and members of the public.

Opinion was divided between both groups on the third lifetime event which should be included in the ISA. The public felt moving to a bigger home was important, but professionals were opposed to adding further lifetime events, as they were fearful that this might overcomplicate the sales and administration process.

Mr Boulding said: “We believe that people need more short-term incentives to save. People will typically make sacrifices up to about five years, beyond five years it is harder for human beings to plan for lifetime events. That’s why we are in favour of the LISA having additional lifetime events.

“Based on the responses, we see this as a great opportunity for the Government to provide people with greater choice and flexibility. We are pleased with the responses from the survey and we will continue to work closely with the Government, industry and trade bodies in the consultation around the policy.”