Lifetime Isa developments do not mark the total and immediate demise of pensions but the new product does pose many challenges, a panel of specialists has found.
During a panel debate at the FTAdviser Retirement Freedoms Forum in Harrogate, Daniel Elkington, IFA for Chattertons said: “The Lisa is not the end of pensions. But we have had an overall complication instead of simplification of pensions, even with the 2006 A-Day changes.
“There is a lack of education on pensions, people do not understand them, even MPs do not understand them and people are therefore not saving enough.
“I hope the Lisa will go some way to tackling these issues, particularly the two biggest issues: getting younger people off renting and onto a mortgage, and helping people make long-term savings.”
His view was echoed by David Thomas, chief executive of Seneca Investment Managers, who commented: “The Lisa does not mean the death of pensions, and we welcome policies that do get more people saving”.
However, he qualified this by adding there could be mis-selling threats further down the line with the Lisa.
Mr Thomas explained: “We are slightly concerned that people will not understand the investment complexity of long-term savings, or they may be in inappropriate funds. This applies of course to any investment - look at pension funds which invest people in government debt at the moment. That’s the devil’s work.”
Fellow panellist Francis Klonowski, proprietor of Leeds-based Klonowski and Co, however, believed with the direction of travel from government, the Lisa could be the start of the death of pensions.
He agreed there could be a mis-selling risk , adding: “Why do we need a Lisa? The more choice you give people, the more confusion. The more confusion, the more chance of getting it wrong, both as advisers and as clients.”
James Rainbow, head of UK financial institutions and strategic accounts for Schroders, said his personal view was there have been too many tax-incentivised savings products coming in since the Isa was first launched in 1999.
He commented: “Initially Isas were simple but now the most appropriate phrase I can think of in terms of government policy is that the road to hell is paved with good intentions. We now have more flavours of Isas than [ice cream company] Baskin Robbins.
“I fear that unlike the majority of people in this room and their clients, who will understand the importance of putting long-term savings into risk assets, most people cannot afford to be in anything other than cash.
“You do not want people to be locked into inappropriate funds until they are 60.”
Mr Rainbow said there had been some market speculation that banks selling low-interest cash-based Lisas particularly could be putting themselves at risk of mis-selling allegations further down the line as people realise they will not have earned as much as they expected.
He added: “Coming at a time when people who have been automatically enrolled will start seeing their contributions rise, asking them to consider a Lisa is a difficult task and could pose problems for workplace pensions. So are Lisas the death-knell for pensions? I would have to give a very qualified yes.”