Editorial: The Lifetime Isa announced in the Budget, while presented in a sweet wrapper marked 'help the young', is not easily swallowed by some, and not everyone agrees what the actual taste will be.
What does sugar have to do with pensions? According to JLT chief actuary Phil Wadsworth, the new levy on sugary drinks announced by the chancellor in the latest Budget will add about £3bn to pension liabilities through increased inflation, while an assumed improvement in people’s health – and therefore greater life expectancy – could compound the issue.
Other Budget announcements were less readily accepted; the pensions industry gave a mixed response to the Lifetime Isa.
The Lisa was predicted and conceived of by think-tank the Centre for Policy Studies’ Michael Johnson, an unelected but highly political figure with Treasury connections influencing recent pensions policy.
Johnson, once an investment banker, now dedicates his time to coming up with new ideas for Britains’ future retirees. He proposed a lifetime savings vehicle with early access, potentially as an Isa, in 2010, following up with another report in 2014.
Helping young people get on the housing ladder is commendable, but while some welcome it, others say the Lisa will sow confusion. The pensions and savings market is already fragmented; adding yet another product could arguably make the situation worse.
Illustration by Ben Jennings
Others still say perhaps that is the intention: confuse people more to garner support for abolishing pensions at a later point, if they don’t become redundant anyway after a mass exodus to the Lisa, as early access is expected to appeal to many.
Johnson's latest proposal is a 'Workplace Isa', which would allow employer contributions, could be used for auto-enrolment and would "end the distinction between 'pensions' and 'savings'".
The concern is that early access to pension savings could create trouble later on. The Isa is consumer-friendly because that is what people can do with it: consume.
While a Lifetime Isa might help sustain the housing market and improve young people’s living standards (or not, if house prices simply go up as a result of the Lisa), it might not do much to keep those living standards up later in life. A house is good, but being able to pay for the heating when you're old is not to be sniffed at either.
