The government last week released its Savings (Government Contributions) Bill, ending speculation about the death of the lifetime Isa and raising questions about the future of pensions policy.
The Lisa was announced as part of the budget earlier this year. It promised a 25 per cent top-up on up to £4,000 a year, if used to buy a first property or kept for retirement.
They’re not ready to support the product but they’re pushing ahead with it anyway
Richard Parkin, Fidelity
The initiative got a mixed reception, with many speculating it was a scheme to introduce a taxed-exempt-exempt structure for pensions by setting it up in parallel to the existing system.
Following the vote to leave the EU and then-chancellor George Osborne’s subsequent departure, many speculated that the Lisa would be quietly dropped.
However, the release of the bill reveals the government is maintaining its April 2017 target for launching the initiative – a date some say is too soon.
Steven Cameron, regulatory strategy director at provider Aegon, said: “Up until Tuesday there were a number of fundamental questions that hadn’t been answered.”
These included speculation about a borrowing facility and whether people would be allowed to save more than the £4,000 annual limit, Cameron said, which will make it difficult for providers to create products in time for the April deadline.
“We won’t get full details until the committee stage in October or November,” said Cameron. “There’s lots of practical detail we still need.”
Richard Parkin, head of pensions policy at provider Fidelity, said the company was still looking at the deliverability of the Lisa. However, he added: “The broader point for us is, while we’ve been supportive, we do question why they need to rush it in for April.”
Parkin said the government planned to pay the bonuses for the Lisa annually, while providers were pushing for them to be monthly.
“They’re not ready to support the product but they’re pushing ahead with it anyway,” he said.
Policy questions remain
Tom McPhail, head of retirement policy at investment platform provider Hargreaves Lansdown, said it was as yet unclear whether the government would continue Osborne’s policies.
Lifetime Isa blurs lines between long and short-term saving
The dreaded tax change on pension saving has been narrowly avoided in the chancellor’s Budget 2016, but the announcement of a lifetime Isa could be a step towards a pensions Isa, industry comments suggest.
“Without further evidence you couldn’t say whether they’re rubber-stamping… or it represents a commitment to continue the policy direction of George Osborne.”
In contrast to many providers, McPhail said he was “relaxed” about the policy going ahead for next April, adding that it would open up further opportunities.
“We think [that] going on beyond that there’s some scope to simplify the Isa landscape,” he said. “It would be in investors’ interest and save the government money if we can come up with a system to save.”
A spokesperson for the Treasury said: “The government is committed to creating a nation of savers, and we have been very clear that our new lifetime Isa is designed to complement, not replace, pensions. It will give people greater freedom and choice to save flexibly for the long term in a way that works for them.”
