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.
Early Access: This is allowed in Australia for health problems, financial hardship, those leaving employment after the age of 50, and those permanent departing Australia. Eligibility is determined by the government with the Superannuation funds administering early access grants.
Taxation: Australian private pension contributions are broadly Taxed – Exempt – Exempt (TEE).
However, the 2016 budget included a proposal to place a retrospective cap of AUD1.6m (£832,053, $1.2m, €1m) on the withdrawal of pension funds in retirements, with the excess taxed at 15%.
This change is part of an overall campaign towards higher tax efficiency and increasing the government’s revenue.
Investment Strategy: Most Australian private pension funds do not vary their default asset allocation in the lead up to retirement, according to research from Mercer.
This is due to change by July 2017 when all remaining default fund balances must be transferred to MySuper products, which must offer a single diversified investment strategy or a lifecycle investment strategy.
Tags: Australia | Canada | New Zealand | Pension | Royal London | Singapore | Steve Webb | US
