The government should scrap the retirement component of the Lifetime Isa, turning it instead into a beefed up Help to Buy Isa, Aegon’s head of pensions has said.
Steven Cameron’s made the comments as the industry waits for the Treasury and HM Revenue & Customs to release the specifications of the new Isa, which they have indicated they will do in “early autumn”.
According to the details laid out by then-chancellor George Osborne in the March Budget, the Lisa, set for launch in 2017, would allow people under 40 to put aside up to £4,000 a year after tax, plus a 25 per cent government bonus, towards either a first home or their retirement.
While Mr Cameron said Aegon “very much supports the aims” of helping younger people get on the property ladder, he said the retirement aspect of the Lisa could potentially coax people out of their workplace pension.
He said creating a new retirement saving vehicle that was in direct competition with the workplace pension would “create massive turmoil for pension savers”.
“Rather than create a brand new Isa, the government should enhance the Help to Buy Isa to allow contributions of £4,000,” Mr Cameron said.
Currently the Help to Buy Isa is limited to a total saving of £12,000, plus a one-off 25 per cent government bonus (a maximum of £3,000), which is paid just ahead of the house purchase.
If the government does go ahead with the Lisa as planned, Mr Cameron urged the Financial Conduct Authority to insist providers issue a warning to customers reminding them if they opt out of their workplace pension, they would miss out on any employer contributions.
Mr Cameron said he doubted many providers would have a Lisa ready for market by the April 2017 launch date, noting that once Treasury and HMRC release the details, the FCA will have to consult on the regulatory guidelines; a process which usually takes three months.
“That means the final regulations won’t be out until early 2017 - optimistically - which doesn’t leave time to design a product by April,” he said.
Adrian Walker, retirement planning expert at Old Mutual Wealth, painted a similar picture.
“It’s something we’re going to look at eventually, but I think at the moment the difficulty for any provider is we are all waiting for the specs to come through,” he said.
“Undoubtedly there are some opportunities,” he added. “If the final rules end up being what George Osborne originally announced, then certainly for the first-time homebuyer market it would look attractive.”
As for the retirement side, Mr Walker said it was a niche product, mainly for people at the higher end of the income scale, who had exhausted their annual pension contribution allowance.
He also said advisers would want to wait until the FCA regulations came out before they decided whether or not to offer Lisas to their clients.
james.fernyhough@ft.com
