Labour has called the Lifetime Isa "populist policy-making" that fails to address the housing crisis seriously, and potentially puts the success of auto-enrolment at risk.
During the second reading of the Savings (Government Contribution) Bill in parliament on Monday (17 October), Labour MP Rebecca Long Bailey said, while the Labour Party supported "the overarching aim" of the bill to promote a culture of saving, there was "significant room for improvement in this bill”.
She said there was "considerable unease across the pensions industry and the unions" over the Lisa, adding: "We are concerned that this scheme could create somewhat of a diversion in traditional pension savings.”
She went on: “The Work and Pensions Select Committee has already outlined its concerns about the effect to auto-enrolment into workplace pensions, which is seeing a great degree of success in its roll-out.”
Ms Long Bailey called on the government to make a detailed study of the effects the Lisa would have on auto-enrolment. She also called for a "detailed advertising campaign ... to ensure that people do not wrongly view it as their main pension product".
She also suggested the government delay launching the Lisa until 2018, when the roll-out of auto-enrolment was complete.
On the subject of housing, Ms Long Bailey said she feared the government was "failing to address the wider causes of the housing crisis", saying a "significant private and public housing programme” was needed, rather than “populist policy-making”.
Other concerns included that the Lisa would benefit higher income savers, and that the fact savers could withdraw their funds at any time - albeit with a 25 per cent penalty - would further put their retirement savings at risk.
The Scottish National Party was also critical of the bill.
Ian Blackford MP said the Lisa ran the risk of "undermining" auto-enrolment.
"After much effort, auto-enrolment has been successful at encouraging young people to save," he said. "We must not undermine those efforts by inadvertently encouraging people to opt out."
He called on the government to "come clean" over whether the Lisa was a backdoor route to a "tax, exempt, exempt" pension model - a model that he called a "reverse Robin Hood" policy which the SNP would "vigorously oppose".
Presenting the bill, financial secretary to the Treasury Jane Ellison defended the Lisa, describing it as a "complementary product" to pensions.
She said young people didn’t want to make a “binary choice” between saving for retirement and saving for later life, adding that "the welcome it’s had from consumer advocates” demonstrated it would be popular.
james.fernyhough@ft.com
