Baroness Ros Altmann has robustly defended auto-enrolment from changes sweeping the pensions environment, following concerns about the Lifetime Isa.
Speaking at the Association of British Insurers’ Transforming Long-Term Savings conference in London, the pensions minister stated: “I don’t want to upset a really successful roll-out of auto-enrolment programme that has been going so well.
“The danger is that we do suddenly want to change things before the programme is settled down.”
Roll-out of the auto-enrolment programme will reach full capacity in 2018.
Repeating earlier criticisms of the Pension Isa, Baroness Altmann said: “I do believe turning pensions into Isas would be a disaster; it would destroy them.
“Pensions have the right messages for people. You get incentives on the way in, you get employer contributions, that’s incredibly powerful.”
Chancellor George Osborne announced in the March Budget that the government would introduce Lifetime Isas, offering a 25 per cent government bonus to help people under the age of 40 save for retirement or buy their first home.
But writing in FTAdviser after the announcement, Yvonne Braun, director of long-term savings policy at the ABI, said the litmus test for the success of what has been dubbed the Lisa, will be whether it works with or undermines auto-enrolment, which has seen nearly six million new savers signed up since 2012.
“Opt out rates for auto-enrolment have been very low to date, particularly among the youngest workers, underlining that young people do ‘get’ the idea of pensions,” said Ms Braun. “This success is at risk if younger people start believing they can get a better deal by saving in a Lifetime Isa.”
Baroness Altmann told delegates at the Grange City Hotel that a Lisa is not a pension, instead it’s a lifetime saving product which should be lasting a lifetime. “If you’re self employed, I can see the advantage, or if you’re saving for a house, I can see the advantage.
“With an Isa, the vast majority of an Isa you save in cash. A pension saves in assets that perform better than cash. What’s best for retirement savings, for later life income?”
She also said the government would be consulting on the new guidance and advice structures available for people.
This would include whether that should include helping people access advice through their employer, or by using their own pension fund.
She also asked the members of the audience, most of whom were from the pensions industry, to get together and make pensions more attractive.
“Maybe the pension providers across the country could get together to fund a publicity campaign for pensions - adverts saying why pensions are great - not negative messages, but why pensions are so special, why they are so important, thinking about the older me, and what will I live on if I don’t have a pension?”