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As we have discussed, clause 5 deals with the question of drawdown. It provides that cash up to a specified maximum amount may be withdrawn before retirement for limited specified purposes. There are, however, two main restrictions on the amount that may be withdrawn.
First, a maximum of 60 per cent. of the value of an account at the time of drawdown may be withdrawn. That is designed to prevent funds gained through tax relief from being withdrawn.
Secondly, a maximum of £40,000 may be withdrawn. That amount was chosen to allow sufficient funds to be withdrawn to cover a house deposit or a long-term course of education, but no more. We have considered the sum that would be required, given house prices in various parts of the United Kingdom and the amount would meet that particular need.
Subsection (4) allows for the repayment to be made within a specified time, which it is anticipated should be no later than retirement. It does, however, make provision that that repayment need not be made for four years to allow for any withdrawal that was due to the provisions on education.
Subsection (5) allows for tax relief to be withdrawn from the fund, equivalent to the tax relief given on the money not repaid after drawdown. The particular purposes for which it can be drawn down are either assistance to the investor in making a property purchase that will be his or her principal residence, to allow the account investor to provide financial assistance to his or her child’s first property purchase, which, in the light of the amendment tabled by my hon. Friend the Member for Weston-super-Mare, also applies to a grandchild, or to fund a prescribed apprenticeship or further or higher education course at a publicly funded institution.
I believe that the proposals work very well in north America and are seen to be a very attractive and successful way of encouraging new funds to be made available in saving schemes. They do not cost the Exchequer anything, because the tax relief is withdrawn if repayment is not made. There is therefore no loss to the Revenue, but people, particularly in their younger years, have every incentive to consider contributing towards a scheme of this sort, and I commend it to the Committee.