More than a third support Lisa expansion, research shows

The Lisa was announced in the Budget earlier this month and has already prompted speculation that its introduction next year will spark the end of pension saving.

This week, the Work and Pensions Committee reopened its inquiry into auto-enrolment to receive submissions on the effect the Lisa’s introduction could have on the initiative.

Source: Now Pensions

Recent research, commissioned by Now Pensions and carried out by Opinium using a sample size of 715 people aged between 18-39, found 30 per cent of respondents planned to save into both a workplace pension and a Lisa.

A further 16 per cent said they would continue to save into a pension and not open an Lisa. Just 9 per cent said they would leave their pension in favour of the Lisa.

Mission creep

However, 41 per cent said they would like to be allowed to put their employer pension contribution into their Lisa. Only 21 per cent opposed the idea.

Rob Booth, director of investment and product development at Now Pensions, said the Lisa’s flexibility appealed to younger savers, and many would like to put their employer contribution into it.

Booth said: “If this helps to encourage saving then I think it’s worth considering. But rather than allowing the employer contribution to go into the Isa, why not afford more flexibility within the existing pension framework?”

Source: Now Pensions

He gave the example of New Zealand’s KiwiSaver workplace pension programme, which allows withdrawals to fund a deposit for a first home or if the saver is seriously ill or in financial hardship. Similarly, in Cyprus, savers can in some circumstances apply for loans from their pension fund he added.

Fears about retirement income levels

Praise for the Lisa has been tempered by fears it would replace pension saving for young people eager to get onto the property ladder and have a deleterious effect on their retirement pot.

Alan Higham, independent retirement expert, said an extension of the Lisa to accommodate employer contributions could lead to people saving less efficiently and ultimately ending up with less in retirement.

“It wouldn’t be the most tax-efficient way of doing it,” he said, noting both employer and employee would have to pay national insurance contributions.

“The government tax take would increase and people’s retirement savings would go down.”

He continued: “The problem with the Lifetime Isa is it combines two things that should be separate: buying a house and saving for retirement.”

Laith Khalaf, senior analyst at investment platform provider Hargreaves Lansdown, said the question of where the Lisa fits in was important.

“For a lot of people, the workplace pension is going to be a more valuable way to save for retirement… the Lifetime Isa works as a good complement to that,” he said.

Khalaf added that the Lisa’s age limit of 40 was a point against it when compared with a pension.

“We should probably bear in mind a lot of people catch up on their retirement saving in their 40s and 50s.”