L for Lisa

When the government consulted on a new tax-free ‘individual savings accounts’ back in the late 1990s, the pensions industry’s responses showed there was widespread concern over how the new vehicle would impact pension saving.

At the time, the National Association of Pension Funds called on the government to delay the introduction of Isas until the Department of Social Security had completed its pensions review and future pensions policy was set out, reported Pensions Week, the predecessor of this publication.

And the Pensions Management Institute warned then that the target audience of Isas was the same as that for stakeholder pensions. Stake-what? They did not leave a lasting impression, but this was probably less to do with Isas than the fact that employers had no obligation to pay into them.

Nineteen years ago, the PMI also said that the average person would struggle to understand a product like Isas. Today, this sounds more than a little ironic in the context of pensions, unsurpassed in their level of complexity as savings vehicles.

But unlike the Isa, the Lisa does not seem to be an easily available alternative: only a small minority of the UK’s banks, building societies and platforms offer it at present. Our article explores the likely reasons for this.

But while there is the option to access the money if needed, the Lisa is more akin to a pension than it is to an Isa.

This is due to the hefty 5 per cent penalty on early withdrawals, which has the potential to put even hopeful young homeowners off using it, as they might need the money for emergencies.

Not much has been said about how the advent of the Isa impacted pension saving since its launch 18 years ago. What is clear is that auto-enrolment has lifted pension scheme membership to its highest recorded levels. If pensions are to remain a success, adequacy must be the next challenge to be tackled.  

Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.