Jamie Jenkins, head of pensions strategy at Standard Life, has said he is not convinced Workplace Isas would engage or encourage people to save more alongside auto-enrolment.
The idea of Workplace Isas has been touted by Michael Johnson, research fellow at think tank the Centre for Policy Studies.
In April this year, the centre revealed a list of proposed details for the Workplace Isa, which would sit alongside the newly announced Lifetime Isa and form part of the auto-enrolment legislation.
Key features of a workplace Isa include employees aged less than 40 should be auto-enrolled into the scheme; employer contributions taxed at the employee’s marginal rate may be paid into a Workplace Isa until the age of 50; and contributions should by accompanied by a 25 per cent HM Treasury bonus.
Withdrawals from the Workplace Isa should not be permitted until the age of 60 and it should be open to all auto-enrolled employees under the age of 40, according to the proposals.
Our experience is that tax wrappers generally don’t excite people at all. Jamie JenkinsFour years ago, Mr Jenkins said Standard Life’s research showed encouraging employees to save into an Isa alongside their pensions could significantly increase their retirement income.
Now, however, he has changed his view on how this would work, stating if the argument is to have a Workplace Isa on the grounds people would save more, he is not convinced offering an alternative to auto-enrolment would achieve that goal.
He said: “Our experience is that tax wrappers generally don’t excite people at all.
“I just don’t think a change in the product or offering an alternative under auto-enrolment is the right way forwards.”
Mr Jenkins explained if you change the products, for example scrapping pensions and putting Isas in their place, all you would really create is years of work to make the same governance around Isas as is present in pensions today.
But David Lamb, partner at Lamb & Associates Lifestyle Financial Planners, said he thought the Workplace Isa would be ideal as the product would encourage people to save over the short to medium term, not just the long term.
He said: “They are also likely to be more flexible than pensions, which will be attractive to those wary of tying their money up in pension. Anything to encourage people to save should be encouraged.”
ruth.gillbe@ft.com
