OpinionApr 13 2017

Why I love my Lisa

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The government still thinks I am young - under 40 (just about - the big birthday is in a couple of months' time). I have bought a Lisa. I am neither afraid nor full of loathing. I am, rather, encouraged and happy.

Why should the Lisa have engendered so much disdain? From what I can discern from all the hyperbole is that some people fear the callow youth of today will invest in a Lisa instead of a pension and therefore be worse off come retirement, and some people loathe the fact they have yet another investment product on which they must advise.

To the latter point, I wonder what, exactly, is the proportion of under-40 year olds with a financial adviser? I would suspect the majority of an advised client base reflects the majority of financial advisers: over 40 years old, and therefore not eligible for a Lisa in the first place.

To the former point, fear can be a terrible, limiting thing. Just because a few young people might ditch their pension saving and opt for a Lisa instead does not mean the product is something which should be rescinded by government, or that all people should be so thoroughly warned away from it.

The fact only five providers had the balls to get a product ready for 6th April shows how much damage fear and loathing can do.

In fact, a poll from consultancy Hymans Robertson found 68 per cent of all young people considering a Lisa as a long-term retirement savings vehicle were going to invest in one alongside a pension, not instead of it.

Of the rest, a significant number were either self-employed or not earning enough to qualify for even an auto-enrollment pension. For them, the Lisa represents a solid start on the road to retirement income, especially with the 25 per cent government bonus. £1,000 for every £4,000 squirreled away? Yes please!

For those wanting it for a deposit on a home, the thought of that bonus is even more tempting, especially when you consider the average house price, according to the Land Registry index, is now at £217,502 and the average salary is £27,600, according to the Office for National Statistics.

Assuming most mortgage lenders want at least a 10 per cent deposit from a first-time buyer, that means young people have to save £21,750 a year to get a home within 12 months. This is impossible. Moreover, it's impossible to do so within several years, let alone one. Taxes, rent, travel and bills mean most people are living from paycheck to paycheck with very little space to save in between.

Now I'm one of the lucky ones. I already have a mortgage, having gotten onto the housing ladder in 2003. I have a pension (defined contribution, bearing all the risk myself). But my employer has capped my contribution limit at 6 per cent until I'm 45. And 6 per cent of my salary is pretty paltry, given that I take home about £28,000 a year after all the current taxes and deductions.

My scope to max out my normal Isa - which I had intended to be spent on future offsprings' school fees but is now diminished by several years of unsuccessful IVF treatment - is limited. So a 25 per cent bonus on a Lisa from the government is pretty attractive.

Moreover, with my state retirement age no doubt rising further over the next 30 years, I'll be lucky to get any state pension until 70 - that is, if there still IS a state benefit available to me by then.

I am unlikely to be leaving paid employment at 55 (or even 75, judging by the way wage rises are not keeping pace with inflation) and so cannot do what wealthy drawdown clients are doing and taking my pension then.

At 55, I'll still be paying off the mortgage; maybe even still paying school fees (if we're lucky), so any plans I may have once had to retire early and go on a tour of the States while I still have my wits and good health have, until now, looked pretty unrealistic.

The Lisa, with its guaranteed payout at age 60, represents for me - and for many other Generation X like myself - the only significant financial shot in the arm we can expect to get our hands on when we're still young enough to benefit from it.

And when I'm 60 and my Lisa gives me a decent sum, I'll be looking for advice as to what to do with it (after I've booked that Greyhound tour).

For us Gen X and for Gen Y and - bless them, the Millennials - the Lisa is not a thing to be feared. It is a financial lifeline thrown to young people struggling to save for all of those things that Lisa's detractors already enjoy.

I'd like to know how many people who criticise the Lisa already have a mortgage, or have paid it off? How many of the critics have gold-plated defined benefit pensions? How many of those people sending me press releases about how Lisa is a "damp squib", something to "BEWARE" (their caps), and "a bad product" earn more than £27,000 a year? 

All this scaremongering has done two things: put advisers off informing clients (or, more accurately, their clients' children) about the launch of the Lisa, and put providers off creating a proper product.

The fact only five providers had the balls to get a product ready for 6th April shows how much damage fear and loathing can do. So much for competition and choice. 

Perhaps it's time for older people to stop scaremongering and assuming they know what young people will do with the Lisa, and start thinking about what they can do to help young people start on their savings journey.

simoney.kyriakou@ft.com