22nd June 2016
As announced in this year’s Budget, a new Lifetime ISA (LISA) will be available from April 2017 for individuals under age 40 which can be used for buying a first home or for saving for retirement. The introduction of the LISA raises some important questions for the future of pensions and long term savings.
One question which is being discussed is if the LISA is a means of gradually introducing a Pension ISA in the workplace. Therefore, WEALTH at work carried out a poll and found that 68% of employers that responded thought that the Lifetime ISA is the start of the drift from pensions to ISAs in the workplace.
Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice comments; “It seems that many view the introduction of the LISA as the foundation for workplace Pension ISAs. However, with concerns that the LISA will compete with workplace pensions and undermine auto-enrolments success in encouraging people to save, should employers be concerned?”
Watts-Lay explains; “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 in fact 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.
Let’s face it, I doubt if many people are currently saving into a pension at the expense of saving for a deposit on their first home, so the LISA will give savers an extra bonus which they would not have if they were saving for a deposit in a standard savings account.”
He continues; “As we know, the workplace already supports employees with various savings vehicles to help them with their short, medium and long term savings goals. This includes workplace ISAs, share schemes and pensions. 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 I see no reason why the LISA wouldn’t be a great addition.”
Watts-Lay comments; “However, employers will need to think about how they can support employees who all want to save in different ways. For example, we already see many companies giving employees a percentage of their salary to buy ‘benefits’ so could this be a method of funding the LISA in the future?”
He concludes; “Whether employees decide the LISA or another savings method is right for them, the need for financial education, guidance and advice has never been more apparent.”
Further coverage can be found in Pensions Fund Online, Pensions Age, Money Observer, Pay & Benefits and Personnel Today.
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. Any hyperlinks or references to third party websites are provided for your convenience only. 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. Further, we accept no responsibility for any malicious codes (or their consequences) of external sites. Nor do we endorse any organisation or publication to which we link and make no representations about them.