Employers must be banned from contributing to employees’ Lifetime Isas (Lisas) to prevent the new savings wrapper from undermining auto-enrolment (AE), Aegon’s head of pensions has said.
Kate Smith made the call as part of a statement outlining the life company’s priorities for the upcoming AE review, due to take place in 2017.
She warned that allowing employers to contribute to a Lisa would “undermine auto-enrolment”, as the pension rules require employers to contribute to a scheme on behalf of their employees, but gives those employees the option of opting out.
Aegon also called on the government to do more to drive up member engagement, encourage auto-escalation, freeze the AE income threshold at £10,000 a year, expand the income band from which contribution rates are calculated, and stop women “falling through the cracks”.
On member engagement, Aegon stated it wanted all workplace schemes to be forced to make the pension dashboard available to their members.
The dashboard, which is yet to get off the ground, is currently a voluntary project.
Ms Smith also warned that Brexit negotiations must not get in the way of the scheduled AE review.
She said: “Negotiations around the EU exit will extend well into 2018, taking up much of the government’s time and energy, but we can’t allow this to stall long-term domestic pension policy.
“The 2017 review must go ahead as planned and look at ways to stop women falling through the cracks of auto-enrolment.
“It should be a priority to address the issue of women with multiple part-time jobs and to drive up member engagement.”
Citing research by Aegon, she said that, on average, people aspire to an “ambitious” annual income in retirement of £38,000 – for which contributions of 8 per cent were insufficient – although she admitted forcing people to save more would be “a hard sell politically”.
Earlier in the week, Now: Pensions director of investment Rob Booth said employers had contacted the scheme to inquire about the possibility of a workplace Lisa.
He pointed out that employers might have an interest in promoting the Lisa over AE, because it could save them money on contributions.
But Nigel Sycamore, business adviser and director of Clear Workplace, said “the vast majority” of his employer clients had never heard of the Lisa, though he added that if it got traction it could undermine AE.
He added: “From an employees’ perspective, the simplicity and ease of use of Isas makes them very attractive.”