Will Lifetime Isas be the death of AE schemes?

Will Lifetime Isas be the death of AE schemes?

More young people will invest in Lifetime Isas than pay into a workplace pension, research has suggested.

The Lifetime Isa was announced in the March Budget by the government and is intended to be a boost for young savers, allowing them to save and withdraw the cash to purchase a home.

However, some commentators in the financial services industry believe the Lifetime Isa - often called the Lisa - could end up replacing pensions eventually.

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This concern has been reflected by analysis from True Potential Investor, which found twice as many workers look set to save into the Lisa compared to a workplace pension - 30 per cent for a Lisa, compared with 15 per cent who would opt for a pension.

The national poll of 2,000 employees revealed:

30% of those aged 25 to 40 would choose a Lisa compared to 15% who would opt for a pension;

64% of 18 to 24-year-olds would use their Lisa to help buy a first home;

58% of 25 to 34-year-olds would use their Lisa for retirement savings;

Employees who are higher up the income scale are twice as likely to save into both a pension and a Lisa compared to those at the other end.

David Harrison, managing partner at True Potential Investor, said: “The Government is caught between a rock and a hard place now because the Lifetime Isa is sure to be popular, but they have rolled out a national pension scheme.

“Few people will be able to afford to save into both, so in reality there will be a choice. Given Isas’ popularity and the added bonus of a 25 per cent top-up, MPs are right to be concerned about pension opt outs.”

Due to launch next April, the Lisa will give people aged 18 to 40 the chance to save up to £4,000 each year and receive a 25 per cent government top-up as a bonus.

The funds can grow and be withdrawn tax free to go towards a first home purchase or for retirement.

Have YOUR say

Is the Lifetime Isa the harbinger of the death of pensions or will it get more young people saving?

Should it be a vital part of an adviser’s toolkit or is it a potential source of future complaints?

These and other topics will be discussed by a panel of experts during an hour-long debate tomorrow (26 May) at 12pm.

FTAdviser is bringing together Richard Parkin, head of pensions at Fidelity International, Tom McPhail, head of retirement policy at Hargreaves Lansdown, and Jon Dean, consultant at Altus, to discuss these issues and answer your question on the Lisa.

To join the FTAdviser OnAir debate click through to this page or copy and paste this URL into your browser window:

You can send us questions on Twitter @FTAdviser using the #FTAOnAir hashtag or email