Emma Ann Hughes  

Osborne is guilty of mis-selling

Emma Ann Hughes

Emma Ann Hughes

With little more than seven months to go until this savings vehicle is supposed to hit the shelves, providers are failing to clamour to produce their versions of the Lifetime Isa.

They are right to be keeping their distance and not chomping at the bit to offer the latest savings vehicle.

But the way the former chancellor pitched this product is disgraceful.

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In what turned out to be his final Budget, George Osborne held out the Lifetime Isa as a fabulous thing for a generation angry about never being able to afford to buy a house and having to work until they drop because of poor pensions.

Back in March, Mr Osborne said the savings scheme was for people who had not had “such a good deal from the pension system”.

The reality is the Lifetime Isa is best suited for those who have truly benefitted from the pension system but still want to save even more.

Yes, the Lifetime Isa isn’t all bad – for top earners who have hit the lifetime limit or annual pension allowance and are looking at another way to top up their retirement income this is a product worth looking at.

But that is not what the man who launched this product is pushing this savings vehicle as doing.

Millions of adults aged less than 40 will be able to use a new Isa to buy a home or a pension, then chancellor George Osborne announced in this year’s Budget.

The Lifetime Isa will be launched in April 2017, and savers will receive a 25 per cent bonus from the government.

They will be able to put in up to £4,000 a year, with the annual bonus of up to £1,000 paid until the age of 50.

The chancellor said that savers would be able to withdraw money from a Lifetime Isa at any time, and would not pay any tax on it.

Those wanting to use the money to buy a home will be able to do so after just a year; but those wanting to use it for retirement will have to wait until the age of 60.

The bonus will disappear if the saver needs to make an early withdrawal for most things other than house purchase. They will also have to pay a 5 per cent exit charge.

Those using the Lifetime Isa to buy property can spend up to £450,000 on a home, but they have to be first-time buyers.

The government said savers would be allowed to withdraw money in the event of "other life events", such as a terminal illness.

This week, speaking at FTAdviser’s Retirement Freedoms Forum, former pensions minister Baroness Ros Altmann warned the Lifetime Isa is a mis-selling scandal waiting to happen.

You would be wise to heed her warning.

If a provider pitched a product for one type of saver when it was in reality mainly suitable for another, they would be accused of failing to treat their customers fairly, face a compensation bill and/or a fine.