Altmann warns Lisa is mis-selling scandal waiting to happen

Altmann warns Lisa is mis-selling scandal waiting to happen

Ros Altmann, former pensions minister, has warned the Lifetime Isa isn’t even close to being as beneficial as a pension post retirement freedoms

Speaking at the FTAdviser Retirement Freedoms Forum in London today (28 September), Baroness Altmann said: “In my view Lifetime Isas risk poorer pensioners in the future and it is a disaster in the making.

“This product has mis-selling written all over it. Just think about it from a customer’s perspective. The Lifetime Isa isn’t a simple product. It needs somebody to understand the whole environment.

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“It is not simple. It is not a pension. This [loss of the 25 per cent bonus and 5 per cent] penalty on withdrawal is punitive. I just cannot for the life of me see how you can justify that when I worked so hard, for so long, to get the cap on pension exit charges down to 1 per cent.

“I am not surprised that so many providers are saying they don’t want to bother with this thing, not just because they don’t know all the details but because it is fundamentally – as a pension -  is not a good product.

“There are no controls on the charges with this. What consumer protection is there?”

Baroness Altmann, who was pensions minister at the time then chancellor George Osborne unveiled the Lifetime Isa, said there are people who will do very well out of Lifetime Isas - just not those people the product was supposedly made for.

Then chancellor, Mr Osborne, said the Lifetime Isa should help individuals looking to combine climbing onto the property ladder and save for retirement.

A packed room of more than 90 advisers were told Lifetime Isas could be considered a good product, potentially, instead for top earners who have already reached the lifetime allowance or the annual allowance and are looking for another way to save.

Baroness Altmann added the Lifetime Isa may also be suitable for top earners, who have already put £3,600 into a pension for their grandchildren and are looking at other ways to help them.

Andy Springford, senior manager of Mazars Financial Planning, said anyone wishing to advise on the Lifetime Isa needed to make their clients aware of how different the latest Isa is from a pension.

He said: “They are two very different types of products. If you are putting your money into a workplace pension your employer has an obligation to put some money in as well.

“As soon as you opt out of that, you remove your chance of doubling your money. Your Lifetime Isa comes in from taxed income.”

At the start of this month, the government announced more details of how the new Lifetime Isa savings wrapper, which was originally announced by former chancellor George Osborne in his March 2016 budget, would work.

However the industry remains in the dark about certain key details, such as provisions for borrowing against the Lisa and when the government bonus would be paid.