A survey has shown overwhelming demand for the Lifetime Isa, with two in three employers saying they would make the new savings wrapper available to their employees alongside - and in some cases, instead of - a workplace pension.
Out of 131 businesses surveyed by Willis Towers Watson in March, two thirds said they believed their employees would prefer a Lisa to a workplace pension.
Half said they planned to give members a choice over which wrapper their employer contribution would be paid into.
The results appeared to lend weight to fears the Lisa would become a rival to workplace pensions, and could encourage people to opt out of auto-enrolment.
Due to be launched in April 2017, the Lisa will allow people aged less than 40 to put away up to £4,000 a year, plus a 25 per cent bonus from the government, either towards a first home or their retirement.
Willis Towers Watson’s senior DC, wealth and workplace consultant Minh Tran said that if the employer contribution went into a Lisa, it would attract national insurance and income tax, whereas if it went into a pension, it would be tax free.
However, he pointed out that the “tax, exempt, exempt” (TEE) structure of an Isa meant that, unlike a pension, it would attract no tax when it is withdrawn by the saver.
The majority of employers also believed the tax treatment of pensions would change, with 60 per cent expecting an eventual shift from EET to TEE.
While this policy was associated with former chancellor George Osborne, who was sacked in July, Mr Tran said the radical reform was likely still “on the table”.
But despite employers’ interest in the Lisa, 60 per cent still believed pensions were a better long-term savings vehicle than a Lisa.
Mr Tran said he shared that view, but getting on the housing ladder was a much greater priority than saving for a pension for people aged less than 40, which explained the expected popularity of the Lisa.
Life company Zurich and consultancy Mercer both reported similar levels of interest in the Lisa from their clients.
Dave Lowe, Zurich’s head of corporate propositions, told FTAdviser there was significant interest in the Lisa among employers, particularly for high-paid staff who had reached their annual or lifetime allowance for pension contributions, which have become less generous in recent years.
He said a “number of employers” were talking about offering a Lisa, while “a few are wanting to look at real proposals”.
While Zurich has not committed to offering a Lisa, Mr Lowe said as a provider of workplace savings solutions, it would consider offering one if it “made sense”.
Brian Henderson, DC and financial wellness leader at Mercer, said it was “early days”, but there were “lots of conversations happening” about the Lisa.
He did not see the Lisa as a threat to pensions at this stage. “I’ve not heard any employer talking about cutting off the pension in favour of the Lifetime Isa,” he said.
james.fernyhough@ft.com
