When George Osborne unveiled the Lifetime Isa (Lisa) back in 2016, many feared pensions would become the main casualty.
Critics said the Lisa’s flexibility to cater for both a first-time home purchase and retirement, with the addition of government bonuses broadly mirroring basic-rate tax relief, would prove preferable to funding a pension from a saver’s perspective.
Concerns even surfaced at the prospect of many choosing to opt out of auto-enrolment in order to take advantage of the former chancellor’s latest savings initiative. Box 1 is a reminder of the Lisa’s offer.
Ten months on, these fears have proved wide of the mark – almost entirely due to a lack of interest in the Lisa itself.
The first barrier to entry has been an absence of enthusiasm on the part of distributors. Currently, the number of stocks and shares Lisa providers can be counted on one hand – and the number of cash providers on both thumbs.
Providers often respond sluggishly to new government initiatives, in order to stringently prepare the product for market, or to understand how the competition is faring. Nonetheless, the lack of availability suggests the Lisa faces a tough task if it is to either help first-time property buyers or boost retirement savings.
Providers have attempted to strike a note of optimism nonetheless. Tom Selby, senior analyst at AJ Bell, which launched a stocks and shares Lisa in the middle of last year, says: “We initially saw a rush of applications from 39-year-olds opening an account before they turned 40 and became ineligible.
“Demand had then been relatively consistent until recently, when we have seen an increase in applications from people transferring their Help-to-Buy Isas before the tax year-end.”
Hargreaves Lansdown, one of two providers that launched a Lisa on 6 April 2017, has also seen a number of Help-to-Buy Isa switches. But as head of communications Danny Cox notes, the uptake has been “steady rather than spectacular”.
Other firms that originally voiced their intention to launch a product have since decided against the idea. Katy Moore, media relations manager at Tilney, says: “This was something we had considered launching for Bestinvest, our online platform, but we are not progressing at this stage due to insufficient demand.”
A lack of public interest is clearly a significant problem for the Lisa. But a lack of supply creates something of a chicken-and-egg situation, and those with the greatest resource to reach out to consumers and create demand – the banks – have so far been non-committal. None of the big UK banks currently offer the product.
AJ Bell, Hargreaves Lansdown, Nutmeg, The Share Centre and Transact are the only firms offering a stocks and shares version, and few have brand recognition with the general public.
According to Mr Cox, the banking industry’s reluctance to join the market has been a fundamental reason for the low activity. He says: “When people start talking about it, more people will take it up. If you haven’t got the larger Isa providers talking about it, then naturally it’s not getting as much publicity.”