Savers are planning to use the Lifetime ISA (LISA) to boost their savings pot, rather than as a replacement for their pension, research by True Potential has suggested.
The LISA, which will be available to those under the age of 40 from 6 April, has faced criticism from the personal finance sector, with a number of commentators expressing concern it could have a detrimental effect on how consumers treat their pensions.
Warnings have also been sounded that savers who plan to opt out of workplace pensions in favour of the LISA could lose valuable employer pension contributions. In contrast, however, many people were planning to take a “best of
Of the 2,000 18 to 40 year-olds canvassed almost half (46%) said they intended to maintain pension contributions and use the LISA to bolster their savings, while one-fifth (18%) were planning to use a pension instead of a LISA. Around one-third (36%) plan to save into a LISA instead of a pension.
The LISA will allow those aged between 18 and 40 to open an account and save up to £4,000 a year until the age of 50 and then access the savings either to buy a first house or help fund their retirement. The scheme rewards savers with a 25% government bonus.
The new saving scheme had succeeded in engaging people, it argued its flaw was not allowing employers to contribute. Employer contributions would give savers a “much better choice”, the group added.
Talk of a surge in workplace pension opt-outs after the LISA’s introduction appear to be overblown. The UK has a burgeoning savings gap that pensions have failed to address, so it is right we look for new ways to save.”
At long last, we have a savings product that has already succeeded in engaging savers.”