Why the odds are stacked against Lisa

Reports of the death of the Lifetime Isa are greatly exaggerated. But with a string of life companies coming out this month to say they couldn’t possibly be ready to launch a Lisa product by next April, and Lisa’s champions George Osborne and Ros Altmann both gone, the odds aren’t looking good.

Right now Lisa’s chances are on a par with those of a unicyclist in the Olympic keirin. Or whatever that Tron-like cycle race the Brits always win is called.

Which is a crying shame. And given that a recent poll found that two thirds of employers feel their staff would prefer a Lisa to a workplace pension, it’s another example of clients getting what the pensions industry wants to give them rather than what they want.

True, the government’s plans for Lisa always were a bit hazy. Critics portrayed it as more needless tinkering with the pensions system and another glib political catchphrase.

It’s wrong to think of 20-somethings as a feckless bunch with no interest in saving for later life

But Lisa didn’t deserve to go the same way as the Northern Powerhouse and the Big Society. Remember that? Few do.

But even if Lisa is stillborn, there are lessons to be learned and an opportunity to be seized.

The first is that if you talk to young people about retirement saving without mentioning the ‘p word’, you get a very different reaction.

A white paper published in June by the investment firm True Potential found that people aged 25-40 would be twice as likely to save into a Lisa than into a pension.

Saving yes, “pensions” no

Pensions clearly have an image problem among the under 40s. Younger people associate the word pension with old age, frailty and wrinkles. And where’s the aspiration in that?

So it’s no surprise that most under 40s, including many professionals, tend to bury their heads in the sand and ignore retirement planning for as long as possible.

But it’s wrong to think of 20-somethings as a feckless bunch with no interest in saving for later life. It’s just that they have so many other things to save for first – a car, a house, childcare, school fees.

Pensions feel very remote for most people at that stage in their lives. But as Lisa’s popularity showed, younger people are much more receptive to the idea of a lifetime saving product.

So the pensions industry should take note – there is a rich seam of demand to be tapped there. But it’s demand for a product that doesn’t yet exist: a truly flexible, tax efficient, lifetime savings account.

Inspiration from across the Pond

The American 401k would be a good model to follow – it’s a workplace pension scheme into which employees contribute from their gross pay. Employers can contribute too, and pension pots grow free of tax.

But the beauty of the 401k is most of them allow savers to borrow from their pot – often up to 50 per cent of the balance. Such loans have to be repaid within five years, making them ideal for large one-off expenses like a deposit on a house.

Whatever you think of George Osborne, he (and Steve Webb) led a revolution in pensions. Pensions freedom successfully fired up people who are already saving into a pot, particularly those approaching 55. And auto-enrolment has forced millions of employees to take their first step in pension saving.

The Lisa was George’s last hurrah. Its obituary will record that the idea was strong on headlines but weak on detail. But what the Lisa did show was that there is a genuine appetite among younger people for a lifetime, or should that be lifestyle, savings vehicle.

So the pensions industry must respond to that latent demand by designing a product that offers the benefits of a conventional pension but reflects what younger people have so clearly shown they want.

The Lisa wasn’t the answer. But by asking such tough questions, it has challenged the pensions industry to find new ways to encourage a generation who are irredeemably turned off by pensions to get into the saving habit anyway.

So RIP Lisa. But if we in the pensions industry can harness the momentum Lisa created to build new saver-centred products that complete the pensions revolution, that will be a worthy legacy.

John Fox is director of Liberty SIPP