Pensions  

True Potential wades into Lisa rules debate

True Potential wades into Lisa rules debate

True Potential has called on Treasury to allow employers to contribute to the new Lifetime Isa, in a move the firm claims would help prevent people opting-out of auto-enrolment. 

The call came after the second reading of the Savings (Government Contributions) Bill on Monday, in which the government said the Lisa was designed to be a "complementary product" to pensions, rather than a competitor.

In its initial outline, Treasury stated that savers would only be allowed to contribute their own money to a Lisa.

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But True Potential managing partner David Harrison said this was a mistake.

“The Lifetime Isa has the potential to engage millions of young people in saving flexibly for a first home or for retirement. It is sure to be popular, but few people will be able to afford to save into both the Lisa and a pension so in reality there will be a choice," he said. 

"Given Isas’ popularity and the added bonus of a 25 per cent top-up, MPs are right to be concerned about workplace pension opt outs.

“If employers could contribute to Lisa savings as well, just as they can with pensions, we’d have a level playing field and people could choose the best product for them. That is the way to avoid an increase in workplace scheme opt outs and it avoids the Lisa becoming a product used mainly by the better off.”

At the bill's second reading on Monday, Labour MP Rebecca Long Bailey described the Lisa as "populist policy-making" that put the success of auto-enrolment at risk. 

SNP Ian Blackford MP agreed. 

"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."

Research by True Potential suggested these fears may be grounded. A survey conducted by the firm found that 30 per cent 25 to 40-year-olds would choose a Lisa, compared to 15 per cent who would opt for a pension.

It also found that 64 per cent of 18 to 24-year-olds would use their Lisa to help buy a first home, while  58 per cent of 25 to 34-year-olds would use their Lisa for retirement savings.

It found employees who were higher up the income scale were twice as likely to save into both a pension and a Lisa compared to those at the lower end. 

True Potential is one of the few providers that have committed to launch a Lisa at the earliest possible date of April 2017.

james.fernyhough@ft.com