The think tank pushing the government to launch a ‘Workplace Isa’ has revealed its proposed product’s key features, which include allowing workers and bosses to contribute £10,000 a year to the saving pot, and tax-free withdrawals post-60.
The Centre for Policy Studies has today (22 April) 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.
In a work and pensions select committee last week, research fellow at the think tank Michael Johnson denied his proposals would scupper the success of auto-enrolment.
Mr Johnson suggested a Workplace Isa would discourage opt-outs because it would expand the existing framework.
|The key features of the Workplace Isa include:|
|It should be open to all auto-enrolled employees under the age of 40.|
|Employer contributions taxed at the employee’s marginal rate, may be paid into a Workplace Isa until the age of 50.|
|Contributions should be accompanied by a 25 per cent Treasury bonus.|
|Withdrawals from the Workplace Isa should not be permitted until the age of 60.|
|Withdrawals afterward 60 should be tax-free.|
|Auto-enrolled employee contributions, made with post-tax income, may be paid directly into the employee’s Lifetime Isa and would be subject to the same tax, withdrawal and penalty rules as other Lifetime Isa savings.|
|Employer and employee contributions should share an annual contributions cap of £10,000.|
|Workplace Isa assets should enjoy the same Inheritance Tax treatment as today’s pension pots.|
|The Workplace Isa could be housed within the Lifetime Isa, leaving the individual with a single retirement savings vehicle.|
Announced in this year’s Budget, the Lifetime Isa allows people under the age of 40 to contribute up to £4,000 a year and receive a 25 per cent bonus from the government.
However, the new offering - which will be launched in April next year - has been mired in criticism as some experts have suggested it would hinder the roll-out of auto-enrolment.
Mr Johnson said the two Isas would help people of “modest means” achieve the goal originally proposed under the auto-enrolment regime, which aimed to create the savings culture he said the UK “so desperately needs”.
He also admitted the Workplace Isa would compete with occupational pension schemes.
The Workplace Isa is expected to be announced in this year’s Autumn Statement following a public consultation. If it is given the go-ahead it will be implemented in 2018.