Osborne’s Lisa may do more harm than good

The chancellor has shunted all the difficult stuff to the end of this parliament, giving himself the flexibility to produce a few more gimmicks in the meantime.

Does the Lifetime Isa, which we may as well go ahead and call the Lisa, deserve this label? The answer will have greater implications for our industry than any other policy initiative of recent times, pension freedoms excluded.

Plenty have welcomed the vehicle as a way of developing a long-term savings culture. From a behavioural standpoint, it’s true that offering to add £1 for every £4 invested is a more attractive incentive to 18- to 40-year-olds than pension tax relief – though whether this is helpful, given foregoing the latter would also mean foregoing employer contributions, is another issue.

There’s also the question of whether the Lisa – and the Pension Isa, which will surely follow in time – represents a further shift towards a system whereby providers push products at savers, or whether it ushers in a move away from a system of vested interests that capitalises on complexity.

The Lifetime Isa looks like a stopgap solution, and that means plenty of changes to come

This second theory has some validity, but I’d bet it’s only a matter of time before this complexity returns in a different form. And this would mean, irrespective of the merits or otherwise of the Lisa itself, a real risk its presence will jeopardise rather than encourage the savings and investment habit.

Let’s put the development in a wider context. The Lisa follows hot on the heels of the Help to Buy, Innovative Finance, and Junior variants. It’s also likely to be in direct competition with the government’s auto-enrolment push.

Some of these problems will be removed in the coming months and years: Help to Buy Isas will end in 2019, and auto-enrolment questions may soon be superseded by the inevitable arrival of the Pension Isa.

But this will be offset by more complexity elsewhere. You suspect the Lisa wasn’t just a surprise to those of us outside the corridors of power. It looks like a stopgap solution, and that means plenty of tweaks still to come during the forthcoming consultation period and beyond.

Add this to existing caveats such as early exit penalties, and you see how the Isa regime is already well on its way to replacing pensions in one particularly unwanted manner.

Isas have been cherished by savers because they’ve been free of the tinkering that has plagued pensions. Those days are ending fast. Even if the Lisa is a short-term success, the long-term effects could yet prove damaging for those trying to attract the next generation of clients.

Dan Jones is editor of Investment Adviser