Small print has allowed the Government to take £9million worth of people's ISA savings and keep it, new figures reveal.

Worse, that figure has been built up in just two years, a freedom of information request by Royal London has found.

The problem is based on the way the new lifetime ISA works.

Designed to encourage people to save for their futures, the lifetime ISA offers people up to £1,000 a year added on top of whatever they pay in between the ages of 18 and 50.

To get the cash, you need to either put the money towards your first first home or keep hold of it until you are 60 to help fund your retirement.

One pile for me, one for the taxman

What's made a lot less clear is that if you take your money out for any other reason at all, you not only lose the extra cash paid in, but the Government takes a bite out of your original savings too.

Steve Webb, director of policy at Royal London, said: "A lifetime ISA can be attractive for those who are clear about their plans to put down a deposit on a house and who are confident that they won’t need the money for any other reason."

How much you lose

Collectively millions have been taken from savers

The problem - and why it's so easy to miss - is the way the money is added and then taken away.

The Government promises to add 25% to the money you pay in (up to £1,000), but then take 25% back for money you withdraw if it's not for a house or after your 60th birthday.

It sounds fair, until you realise that the second 25% comes from a bigger pot than the first.

In pound terms - imagine you pay in £80. The Government then adds 25% to it - working out at £20.

That leaves £100 in the pot.

If you then withdraw that £100, the Government takes its 25% again - but this works out at £25 this time.

Which means, for every £80 you pay in you only get £75 back.

And that's something Webb, for one, thinks is simply unfair.

"It is hard to see why the Government should fine people whose only ‘crime’ was to put money aside in the hope of buying a home and then see their circumstances change," Webb said.

"The lifetime ISA would be a much attractive product if this penalty charge was abolished."