Potential pitfalls of the Lifetime Isa – Royal London
By Kirsten Hastings, 14 Jun 16
To be introduced in the UK in April 2017, the Lifetime Isa (Lisa) is intended to incentivise people to save for their first home, their retirement, or both. But research published by the independent Pensions Policy Institute (PPI), sponsored by Royal London, compares the tax-free savings scheme with its international counterparts and highlights some challenges that may arise.
The PPI research covers five countries – Australia, Canada, New Zealand, Singapore and the US – and looks at the pensions and long-term savings system in each. For Royal London, the findings raise a number of issues about the impact of the Lisa on long term savings that will need to be addressed.
Commenting on the research, Steve Webb, director of policy at Royal London, said: “This new research highlights the challenges which arise from the UK’s decision to have two separate long-term savings vehicles – a Lifetime Isa and a workplace pension.
“Unless individuals can afford to save in both, they will have a difficult choice to make. Giving up a workplace pension with an employer contribution in favour of a Lisa could prove very costly in the long run.
“There is also clear international evidence that money held in savings accounts which can be easily accessed tends to be invested in lower risk, lower return assets. By contrast, money locked up in pensions is generally invested for the long term and is likely to generate better returns.
“Using an accessible savings vehicle such as a Lisa for long term savings could significantly damage consumer outcomes.
“This research reinforces the need for guidance and help for people of all ages when it comes to long term saving choices,” Webb said.
Click through the following slides to read about the pension and savings systems in each of the countries and the possible implications of the Lisa for UK savers.
Tags: Australia | Canada | New Zealand | Pension | Royal London | Singapore | Steve Webb | US
