10th May 2017
By Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education, guidance and advice in the workplace.
The new Lifetime ISA (LISA) has been launched in April 2017 for individuals under the age of 40, to be used for buying a first home or for retirement. The LISA has had negative press from the pensions industry, as concerns have been raised that it will compete with workplace pensions and undermine auto-enrolments success in encouraging people to save.
However, I don’t believe this will be the case. Pensions should, of course, remain an integral part of saving. Yet other choices such as the LISA should not be seen as a threat, as they may actually encourage employees to develop a savings habit, which ultimately could benefit pension savings. After all, the LISA is a great option for those who want to save for a deposit on their first home due to the guaranteed bonus.
In fact, we recently carried out some calculations* which found that whilst saving into a LISA can help employees to save for a deposit faster than using a savings account, by achieving this earlier they also can increase the size of their pension pot, as money can be diverted to pension savings earlier than would have been the case if a LISA had not been used for a house purchase.
The introduction of the LISA has also raised important questions about how it will operate in the workplace and if employers will offer it as part of a reward package. Interestingly, our latest research** found that 42% of employers who responded to our poll will provide access to the LISA through their reward packages.
It’s great to see that many employers will provide the LISA as another savings option for employees. After all, workplace savings are not just about pensions and employers need to think about what savings vehicles suit which employee needs, appealing to a broad range of individuals at different life stages and with different saving priorities. For example, the workplace already supports employees with various savings vehicles such as ISAs, share schemes and pensions, to help them with their short, medium and long term savings goals. Such variety allows employees to choose a savings method, or a combination of methods, which are the most appropriate for them at a given point in time, so offering the LISA as part of an overall saving package makes sense.
However, it is imperative that employers understand the needs of their staff before implementing any savings vehicles. The key is to identify what an employee’s saving priorities and attitudes to risk are. The various cohorts of the employee population will differ: younger groups may want to save for a deposit for a house, whereas for an older group that probably won’t be a priority, but a good pension will be.
On the back of this, employers can then start to build out a benefits provision that will appeal to each demographic in the workforce.
With so many options now available, the provision of financial education, guidance and advice in the workplace is essential for employees to understand what can be achieved through workplace saving.
For more information, please contact us.
Further coverage can be found in Employee Benefits.
IMPORTANT – External links please read: Virus status
*Contents of links to external websites
Links to websites external to those of Wealth at Work Limited (also referred to here as ‘we’, ‘us’, ‘our’ ‘ours’) will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Nor do we endorse any organisation or publication to which we link and make no representations about them.
Please note that the content of this website including any external articles to which it links are not financial advice and must not be relied upon to make investment decisions. Further, please note that investments can fall as well as rise and that if investing you may get back less than you originally invested.
Subscription only sites
Where we have been quoted in an article or we are the authors of an article held on a third party website we may provide a link to that site, even though it is a subscription only publication. Please note that by doing so we are not advertising the subscription nor are we suggesting that you should subscribe. We are merely providing a link for those people who already have a subscription should they wish to read the article. If you do not have a subscription then often only the first lines of an article may be available to read. You should not rely on that limited content to form a view of what the whole article may say or conclude. Often a headline or an excerpt of an article are not representative of the article in full. Reading a part only and/or out of context may be misleading and must not be relied upon.