PensionsAug 4 2017

Scottish Friendly calls for overhaul of Lifetime Isa

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Scottish Friendly calls for overhaul of Lifetime Isa
ByLaura Miller

A mutual society has called for an overhaul of the Lifetime Isa, just five months after the new way of saving was launched.

Scottish Friendly - which offers a hybrid version of the product where savers save with a regular Isa first before transferring into a Lisa if they choose - said the current structure of the new savings product is flawed and the government needs to make changes.

Appetite among savers to open Lifetime Isa accounts under the current rules seems strong, however.

Skipton Building Society has seen 28,000 people open a cash Lifetime Isa since it launched the account in June. It is the only lender offering a cash version of the savings product.

According to the building society the Lisa is particularly popular among young people, with more than half of those opening the account aged until 30. Only those under 40 are eligible for the product.

But Scottish Friendly has called for reforms to the accounts.

It wants consumers who save or invest through a Lisa to be able to benefit from employer contributions in the same way as though who invest in a pension.

It also said Lisa products should be accepted as auto-enrolment savings vehicles, if they are to be on a level playing field with pension products.

In a report, Scottish Friendly has laid out six changes it wants made to the current structure of Lisa products, including removing the age restriction so those over 40 can also open accounts.

Neil Lovatt, commercial director at Scottish Friendly, said: “There is no disputing that the Lifetime Isa has the potential to address the issue of record low savings levels but if the purpose of the Lisa is to support younger people as they save for retirement then the products should have the same status in relation to employer contributions as pension products.”

Research by the firm found 47 per cent of people in full-time employment would be more likely to use a Lisa to save or invest if employer contributions were included.

Lovatt said: “There is clearly more work to be done on the Lisa, it is by no means the finished article. There are a number of considerations the government must make before refining it to ensure it becomes the savings and investment product that people desperately need.”

But other experts have said it is too soon after the launch of the product to start making changes to it.

Vanessa Clayton, adviser at Courtiers Wealth Management said the Lisa shouldn’t be viewed as a straightforward replacement for pensions.

She said: “Isas and pensions serve different, often complementary, purposes and it is probably better not to blur the distinction too much further.